Reserve Bank of India Governor Shaktikanta Das, in his address today has proposed to provide restructuring options for the borrowers who are finding it difficult to repay loans on time. The new restructuring 2.0 options will be available to individuals and small businesses who had availed the restructuring earlier and even for those who had not availed it earlier.
“RBI has been very pragmatic in its approach towards handling the Covid crisis. While RBI has not announced a blanket moratorium today, stressed borrowers have been given a choice to opt for resolution if required. This will ensure that only those who genuinely need the restructuring of their loans will approach the banks. At the same time, it will help counter financial stress in the system,” says Anshuman Panwar, Co-Founder, Creditas Solutions.
The RBI EMI moratorium on loan payments ended its six-month run on August 31, 2020. Thereafter, RBI had given the option to borrowers to approach the bank for further restructuring based on the RBI’s Restructuring Circular issued in August 2020.
Even though the moratorium has not been explicitly made available, the benefit of re-structuring 2.0 can still be of the nature of moratorium of EMIs. “The absence of a moratorium announcement will be viewed positively by the market, implying that the situation is not dire enough to warrant another moratorium. The RBI’s actions are unlikely to give the market a big boost, but they are likely to provide downside support and boost morale. However, the pandemic has had a wide impact on the industry. A rollout of wider relief initiatives aimed at mid-corporate and large borrowers, and industries heavily affected by the pandemic, such as real estate, hospitality, would have been beneficial,” says Akshay Taneja, MD TDI Group.
Those who had not availed the re-structuring 1.0 can now avail of the restructuring 2.0 if the loan amount is up to Rs 25 crore. The loans are required to be classified as standard loans as on March 31, 2021 and all banks and lending institutions will have to revoke the scheme anytime up to September 30, 2021.
Even those who had availed re-structuring 1.0 where the resolution plan permitted a moratorium of less than two years, lending institutions are being permitted to use this window to modify such plans to the extent of increasing the period of moratorium and/or extending the residual tenor up to a total of 2 years. Other conditions will remain the same.
The banks are providing the restructuring options and depending on the amount of principal outstanding, one may defer the unpaid principal to the end of the tenure. However, actual restructuring will depend on the case-to-case basis based on conditions set by the lender.
Amidst the Covid-19 pandemic and especially after the second wave, the liquidity crunch still persists in many sectors of the economy, thus impacting individual borrowers. Not all borrowers may be in a position to start paying the EMI’s on time. It is better to approach one’s lender and ask the bank for a restructure of the loan citing the RBI’s restructuring 2.0 circular.