Loan moratorium ends today, but you can opt for restructuring
NEW DELHI: Come August 31 and the six-month blanket moratorium period to provide relief to borrowers in view of Covid-19 pandemic will be over. For those who availed the option will now have to start the repayment cycle, yet personal loan borrowers can approach their bank for loan restructuring.
Earlier this month, the Reserve Bank of India (RBI) allowed a one-time loan restructuring scheme for both corporate and retail borrowers under which pandemic-induced stressed loans will not be classified as non-performing assets and the borrower won’t be reported a defaulter.
According to RBI’s Resolution Framework for COVID-19-related Stress, the resolution of stressed personal loans will be available only to those borrowers who were repaying their loans regularly as on 1 March 2020. Such a measure would succor borrowers who are genuinely under financial stress and are not able to service their loans due to financial constraints.
Individuals can approach their banks for loan restructuring, which if agreed upon, will allow borrowers to repay loans but with revised terms as decided by lenders. The resolution plan, however, may vary from individual to individual and from bank to bank. Besides, banks have the discretion to refuse the restructuring, given the financials and repayment performance of the borrowers.
“This is an option for borrowers but whether the bank will approve it or not depends on the bank. Customers can negotiate terms with bankers. This will also mean they can get loan periods extended while reducing EMI amount,” a senior bank executive from the State Bank of India, said. He added that banks have their own criteria to decide on restructuring.
“Banks generally see the payment record of the customer. If the record is clean then the bank may allow restructuring. Other financial liabilities are also taken into consideration,” the executive added. Most importantly, the restructured loan will continue to be considered as standard till the borrower sticks to the resolution plan and your credit rating will not be impacted. Lenders are also not required to make provision for these loans. The maximum extension under restructuring is two years, and borrowers will have to approach banks till December 30 if they wish for restructuring.