Explained: How RBI’s Loan Restructuring Scheme Works

The six-month loan moratorium provided the much-needed relief to borrowers during the economic distress caused by the Coronavirus. But, it ended on August 31, 2020.

Recently, finance minister, Nirmala Sitharaman has asked banks and NBFCs to roll out loan restructuring scheme to provide support to borrowers, who are financially impacted due to the COVID-19 pandemic.

Under this scheme, the eligible borrowers will get more time to pay back without classifying the loan as an NPA.

Which loans can be restructured?

As per RBI’s circular,

• Loans that are classified as standard, and are not in default for more than 30 days, as on March 01, 2020 are eligible for restructuring.
• All retail loans, including home loans, personal loans, top-up home loans, car loans, gold loans, and education loan are eligible for restructuring as per the scheme.

How the loan restructuring will happen?

As per the RBI circular, banks may either offer a further moratorium of up to 24 months/two years or extend the outstanding loan tenure so that the EMIs are reduced. The outstanding interest accrued during the moratorium period will be transferred to another loan depending upon the borrower’s repayment capacity.

However, the restructuring will differ from bank to bank based on their policies. Borrowers can apply for loan restructuring before December 31, 2020.

Will loan restructuring affect your credit score?

As per regulatory guidelines, restructured loans/credit facilities will be reported as ‘Restructured’ to the credit bureaus and it may impact your credit history and credit score.

Who is eligible for loan restructuring?

The following are eligible for loan restructuring:

1. Only those individuals and entities who were making regular repayments and were not overdue on their loans for more than 30 days as of March 1, 2020, are eligible to benefit from this scheme.
2. Customers who are financial impacted due to COVID-19 pandemic in the form of loss or reduced income/cash flow.
3. The financial impact will be reviewed by the bank or lender on the basis of documents provided before granting loan modification. Also, the customer’s repayment track record, and reasons given by the customer while getting moratorium earlier will be considered while deciding on the restructuring eligibility.

Is MoneyTap providing loan restructuring for its customers?

We are working on making this policy. We’ll update our customers once we are through with it.

FAQs

1. What does the RBI-approved restructuring scheme mean?

The RBI has provided a framework to banks and lending institutions to implement resolution plans addressed to the significant stress customers are facing due to the COVID-19 related economic meltdown. Based on the framework and the regulatory guidelines, the banks are asked to frame their policies for the restructuring of loans of individuals and entities impacted due to the coronavirus pandemic.
2. How do I apply for the loan restructuring benefit?


The application link will be provided on the bank’s website. You have to fill the form and submit the relevant details.

3. What are my loan restructuring options?


To ease the burden of EMI payments, the balance loan tenure can be extended further by up to 24 months.

4. What documents do I need to submit to avail the loan restructuring benefit?


The bank will need you to submit the documents that detail the current business or employment status. For salaried borrowers, the bank may ask for bank statements and salary slips. For self-employed professionals/entities, the bank may ask for GST returns, bank statements, Udyam certificate, Income tax returns, etc.

5. Will I be charged any processing fees or charges for restructuring my loan?


The bank may charge a fee for loan restructuring.

6. I have EMI plans on my credit card within my credit limit. Can I apply for the restructuring of only the outstanding balance and not the EMI plans?


The total outstanding credit card balance that includes the loans within the credit limit will get restructured and converted into a different loan account

7. What is the minimum outstanding requirement for taking the restructuring facility?


The minimum outstanding balance required to restructure the credit card credit/loan is ₹ 25,000.

8. I didn’t apply for moratorium before. Can I apply for loan restructuring now?


Yes, you can. The loan structuring scheme is open to all bank customers, irrespective of whether they applied for a moratorium or not as long as the borrower meets the loan restructuring regulatory guidelines and eligibility.