Loan restructuring: Who is eligible and what loans are covered? 

The Reserve Bank of India (RBI) - as an interim relief measure - provided a six-month moratorium to aborrowers till August 31, 2020. Before the end of the moratorium date, the RBI, on August 6, issued a circular detailing the resolution plan for loan restructuring. If you are a borrower, then you can make an application for loan restructuring. Once the application is approved you can receive benefits such as flexibility in loan repayments, revised cost of interest payment and increased tenures of loans.

Loan restructuring eligibility

• According to the RBIs resolution plan, borrowers could opt for loan restructuring, provided their loans were not outstanding for more than 30 days on March, 1, 2020.
• Borrowers could avail loan restructuring, irrespective of having availed the moratorium. Those eligible also include borrowers who have paid all their EMIs and their loans are categorised as standard loans on the date of making an application. 
• While the previous six-month moratorium on making EMI payments was available to borrowers, the central bank has now specified that this provision will only be available to those borrowers, who have been financially impacted by the pandemic. While a salaried person can submit evidence supporting loss of job or reduced salary, a self-employed person can submit bank accounts along with GST returns or any other requisite document, as asked by the financial institution. 

Loan restructuring provisions 

The resolution policy allows for granting an additional moratorium of a maximum period of two years. Borrowers are allowed to reschedule their loans, or convert their outstanding interest into a separate credit facility. The provision for loan restructuring, however, is a one-time scheme. Acceptance of loan restructuring process is applicable until 31st December, 2020. Please check with your respective financial institutions for the last date of application. 

Types of personal loans eligible for restructuring

As per the circular, following types of personal loans provided to consumers can be availed for loan restructuring: 

• Consumer credit
• Education loan
• Loans provided for creation or enhancement of immovable assets, like housing loans etc.
• Loans provided for investment in financial assets, like shares, debentures etc. 

The RBIs circular further clarified that consumer credit referred to the following loans: 

• Loans availed for purchasing consumer durables
• Loans for credit card receivables
• Automobile loans, except for commercial use
• Personal loans availed through collateral, like pledging gold, immovable property, fixed deposits etc. 
• Personal loans provided to professionals, except for business purposes.
• Loans provided for consumption purposes, like for social ceremonies etc. 

Customers eligible for loan restructuring

1. Individuals and entities (Personal loan segment): This category includes customers either as individuals or as entities availing personal loans. 
2. Entities (MSME segment): Their total outstanding should be less than Rs 25 crore, subject to fulfillment of GST-registration conditions. 
3. Others: This section comprises those borrowers, who don’t fall in the category of either personal or MSME loans.

Conclusion: Thus, the loan restructuring process can allow you to ease the financial stress caused by the pandemic. If you are looking for a new personal or business loan, always rely on a trusted and reliable financial institution. You can zero in on HDB Financial Services (HDBFS), a leading NBFC in India, which provides a wide array of customised personal and business loans in a quick, convenient and hassle-free manner.