Settlement is a technolegal failure of law of banking. Wheras only resolution cum clearance is the right way to close an existing file.


What does a settlement mean:
In a settlement letter the bank clearly states that settlement is given to a borrower under exceptional circumstance. Thus a consumer/borrower who enters into a settlement gets an NOC but if he/she goes into applying a new loan/creditcard he is denied by the bank.
Why so? Technicality.
Settlement is given by bank only under mentioning - exceptional circumstance as the bank believes that they cant collect any money from borrower they give a settlement which is to retrieve some amount collected is better than nothing.


Now if the consumer who has done a settlement with a bank goes to a 2nd bank - the manager shall hesitate to give the person a loan. Why? for ex: the person who got a settlement gets a loan of 10 lakhs from bank no.2 the bank no.1 which gave the settlement under condition-exceptional circumstance can overule the settlement as they find a cash flow into the account of the borrower.
They will try and sqeese maximum amount from the borrower finding inflow of fresh funds into his account.


Thus bank no2. is very scared that if funding it does to a consumer who made settlement earlier with bank no.1 their funds will directly be collected by bank no.1 overuling the settlement .


How to avoid such issues?
The borrower who has NOC Letter or no NOC can and should contact banking advocate like ALLIED LAW and we at ALLIEDLAW make sure that the person who made settlement will get NOC 1st and then we shall write to the bank - that as settlement was achieved only because of mutual understanding achieved between banker and borrower to make settlement - the bank gives no claimant -resolution letter.
The same is updated at CIBIL .



AND
No bank can deny loans if a consumer who made settlement with bank no.1 has given him/her a no claim cum resolution letter.

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