Firdous Ahmad

Jammu & Kashmir Bank has introduced the RAHAT Special One-Time Settlement Scheme (SOTS-2026) to help eligible borrowers settle their stressed loan accounts.

Many borrowers have questions: Does the Bank waive the entire loan? Do I have to pay only half? Can a trader with an old business loan apply? What is the 15% payment?

Let’s understand everything with simple examples.

1. First, what exactly is OTS?

Suppose you borrowed Rs 10 lakh from J&K Bank to run a business. Due to business losses, you could not repay the loan. Your account eventually became an NPA (Non-Performing Asset).

Over time, interest and other charges may also have accumulated.

Under a One-Time Settlement, the Bank calculates a settlement amount under its prescribed rules. You pay that agreed amount within the permitted time, and the eligible outstanding balance is written off or waived as provided under the scheme.

In simple words: Instead of recovering the entire eligible outstanding amount, the Bank allows a qualifying borrower to close the loan by paying a lower, prescribed settlement amount.

However, the amount is not the same for everyone.

2. Who can benefit from RAHAT?

The scheme covers eligible accounts in the following categories:

• Doubtful-I (DF-I)
• Doubtful-II (DF-II)
• Doubtful-III (DF-III)
• Loss Assets
• Technically Written-Off (TWO)
• Recoverable Loan and Advances (RLA)

There are two loan segments:

• Segment A: Principal NPA balance below Rs 25 lakh.
• Segment B: Principal NPA balance from Rs 25 lakh to Rs 5 crore.

The relevant balance is as on June 30, 2026. Generally, the account must have remained an NPA for at least one year. SARFAESI action must also have been initiated by June 30, 2026, wherever applicable, subject to specified exceptions.

3. How much do you actually have to pay?

This depends on three things:

1. Whether your loan is secured or unsecured.
2. Whether it is classified as DF-I, DF-II, DF-III, Loss, TWO or RLA.
3. The amount of principal outstanding and, for certain secured loans, the value of the security.

Let’s take examples.

A. If your loan is below Rs 10 lakh

For eligible unsecured loans, the settlement rates are:

• DF-I: 60% of principal NPA balance.
• DF-II: 55%.
• DF-III, Loss, TWO and RLA: 50%.

Example: You have an unsecured loan with a principal NPA balance of Rs 10 lakh.

So, if your account falls under DF-III, Loss, TWO or RLA, the prescribed settlement amount would be Rs 5 lakh, instead of the Rs 10 lakh principal NPA balance.

For eligible loans secured by tangible assets, the rates are different:

• DF-I: 75%.
• DF-II: 70%.
• DF-III, Loss, TWO and RLA: 65%.

For example, if the principal NPA balance is Rs 8 lakh:

• DF-I borrower pays Rs 6 lakh.
• DF-II borrower pays Rs 5.6 lakh.
• DF-III/Loss/TWO/RLA borrower pays Rs 5.2 lakh.

For accounts with principal balances up to Rs 10 lakh, the applicable settlement amount cannot be below Rs 5,000.

B. If your loan is above Rs 10 lakh but below Rs 25 lakh

For eligible unsecured loans, the rates remain:

• DF-I: 60%.
• DF-II: 55%.
• DF-III, Loss, TWO and RLA: 50%.

Example: Your principal NPA balance is Rs 20 lakh and your loan is unsecured.

• DF-I: Pay Rs 12 lakh.
• DF-II: Pay Rs 11 lakh.
• DF-III/Loss/TWO/RLA: Pay Rs 10 lakh.

The remaining eligible principal amount is written off according to the scheme.

C. What happens if your loan is secured by property or another tangible asset?

This is where the calculation becomes different.

For secured loans above Rs 10 lakh, the Bank calculates something called NPV (Net Present Value) of the security.

In simple language, the Bank assesses the value of the property or other security and calculates its present value under the prescribed formula.

The settlement amount is then determined using that calculation.

Example:

Suppose your principal NPA balance is Rs 20 lakh. The Bank calculates the NPV of your security at Rs 16 lakh.

Under the scheme, where NPV is below 100% of the principal balance, the settlement amount is the higher of:

• NPV; or
• 80% of the principal NPA balance.

Here:

• NPV = Rs 16 lakh.
• 80% of Rs 20 lakh = Rs 16 lakh.

Your settlement amount would therefore be Rs 16 lakh.

This is only an illustrative example. The Bank will calculate the actual NPV and settlement amount based on its valuation and prescribed formula.

D. What about loans from Rs 25 lakh to Rs 5 crore?

For eligible unsecured loans, the same settlement rates apply:

• DF-I: 60%.
• DF-II: 55%.
• DF-III, Loss, TWO and RLA: 50%.

Example:

Suppose a business has a principal NPA balance of Rs 1 crore in an unsecured loan.

• DF-I: Settlement amount Rs 60 lakh.
• DF-II: Settlement amount Rs 55 lakh.
• DF-III/Loss/TWO/RLA: Settlement amount Rs 50 lakh.

For secured loans in this segment, the Bank uses the prescribed NPV-based formula. The settlement amount cannot be calculated simply by applying the unsecured percentages.

Important: These examples assume that the account qualifies and that the stated principal balance is the amount used for the scheme’s calculation. The Bank’s final calculation will determine the actual amount payable.

4. What happens to interest and other charges?

The scheme provides for full waiver of unapplied interest, legal expenses and other charges in the specified eligible cases, subject to the scheme’s conditions.

For example, suppose:

• Principal NPA balance: Rs 10 lakh.
• Unapplied interest and other eligible charges: Rs 3 lakh.
• Applicable settlement amount: Rs 5 lakh.

The borrower pays Rs 5 lakh under the settlement. The eligible remaining principal and specified interest and charges are dealt with through write-off or waiver under the scheme.

Remember: the settlement is not automatically calculated on the total figure shown in a bank statement. The principal NPA balance and applicable formula matter.

5. What is the 15% upfront payment?

This is one of the most important conditions.

Once the Bank communicates the settlement amount, the borrower has to deposit 15% of that amount when submitting the application. Without this upfront payment, the application will not be processed.

Example:

Suppose the Bank approves an OTS settlement amount of Rs 5 lakh.

• Total settlement amount: Rs 5,00,000.
• 15% upfront payment: Rs 75,000.
• Remaining 85%: Rs 4,25,000.

You must deposit Rs 75,000 at the application stage.

If the Bank rejects the application, the upfront amount kept in a separate OTS Parking Account is to be refunded without interest within three months.

6. How much time do you get to pay the remaining amount?

Ordinarily, the borrower gets three months from the date of sanction to deposit the balance 85%.

Using the above example:

• Total OTS amount: Rs 5 lakh.
• Upfront payment: Rs 75,000.
• Balance payment: Rs 4.25 lakh.
• Time allowed: Three months from sanction.

There is also a provision for an extension.

If you deposit at least 50% of the total settlement amount within the initial three months, a further period of up to three months may be granted to pay the balance.

For a Rs 5 lakh settlement:

• 50% of settlement amount = Rs 2.5 lakh.

If you have deposited at least Rs 2.5 lakh within the first three months, you may qualify for the additional period. Interest at the six-month MCLR rate from the date of sanction applies to the balance amount.

The maximum payment period cannot exceed six months. The extension is subject to the scheme’s conditions; it is not automatic.

7. Is there a discount for paying early?

Yes. The scheme provides an incentive for early payment of the entire settlement amount.

• Pay the full amount within one month of sanction: 3% incentive.
• Pay the full amount within three months of sanction: 1.5% incentive.

Example:

If your settlement amount is Rs 5 lakh:

• 3% incentive = Rs 15,000.
• 1.5% incentive = Rs 7,500.

This incentive is available only when the entire settlement amount is paid within the specified period.

8. How can you apply?

The process is relatively straightforward:

Step 1: Visit the J&K Bank branch where your loan account is maintained.

Step 2: Ask the Branch Manager whether your account is eligible under RAHAT SOTS-2026.

Step 3: The Bank will examine your account classification, principal NPA balance, security and other eligibility conditions.

Step 4: If eligible, ask the Bank to provide the written settlement offer showing the exact amount you have to pay.

Step 5: Submit your willingness and application, along with the required acceptance documents and 15% upfront payment.

Step 6: After receiving the application, upfront payment and acceptance letter, the Bank’s guidelines provide for communication of the sanction within seven days.

The Bank has also instructed its branches and concerned recovery centres to contact eligible borrowers through letters, SMS, email or telephone.

You do not have to wait for the Bank to contact you. If you believe your account may qualify, approach your branch and seek clarification.

9. Who cannot apply?

The scheme excludes several categories, including:

• Wilful defaulters.
• Accounts where fraud has been reported to the RBI by the Bank.
• Serving or suspended government, semi-government and public sector employees’ loans.
• Government and public sector pensioners.
• Loans guaranteed by the Central or State Government.
• Staff NPA accounts, except those of deceased employees.
• Cases under investigation by external agencies.
• Accounts with an active normal OTS sanction.
• Accounts with an active approved restructuring or rehabilitation arrangement.
• Certain loans against deposits, gold, insurance policies, NSC, mutual funds and shares.
• Cases admitted in NCLT or under liquidation.

There are also special rules for borrowers having multiple loan accounts under the same customer ID. Such accounts may have to be settled together if they are to receive the scheme’s concessions.

10. What if you fail to pay after the OTS is sanctioned?

This is a very important warning.

If the borrower fails to pay the full settlement amount within the permitted three-month or six-month period, the Bank can revoke the settlement.

The amount already deposited, including the upfront payment, will then be treated as normal recovery against the loan. The Bank can also resume recovery proceedings.

Therefore, do not accept a settlement offer unless you are confident that you can arrange the required funds.

Final message to borrowers

RAHAT is an opportunity for eligible borrowers to settle old stressed loan accounts and get relief from outstanding financial liabilities.

But every case is different. The settlement amount depends on the account category, whether the loan is secured or unsecured, the principal NPA balance and the Bank’s prescribed calculation.

If you have an old J&K Bank NPA account, visit your branch, ask for your eligibility and obtain the settlement calculation in writing before making a decision.

This explainer is based on J&K Bank’s Annexure-A and Annexure-B guidelines. All examples are illustrative, not individual settlement offers. Final eligibility and settlement amounts will be determined by J&K Bank under the scheme.

The Biz Reporter