RBI lets people to restructure loans, ends moratorium

Even as the Reserve Bank of India (RBI) disappointed borrowers by not extending the loan moratorium, it has announced a one-time restructuring of loans taken by individuals, corporates and small businesses.

In his Monetary Policy statement on Thursday, RBI governor Shaktikanta Das said, “The disruptions caused by Covid-19 have led to heightened financial stress for borrowers across the board… Accordingly, it has been decided to provide a window to enable lenders to implement a resolution plan with respect to eligible corporate exposures as well as personal loans.”

According to RBI, personal loans mean credit facility extended to individuals, which include consumer credit, education loan, loans given for creation or enhancement of immovable assets (housing loans) and loans given for investment in financial assets such as shares, debentures.

The resolution of personal loans will be available only to those borrowers who were repaying their loans regularly as on March 1. Eligible borrowers’ accounts will continue to be classified as standard till the date of invocation of resolution under this framework.

The borrowers should choose this option before December 31, 2020 and the resolution must be implemented within 90 days.

“The resolution plans may inter alia include rescheduling of payments, conversion of any interest accrued, or to be accrued, into another credit facility, or, granting of moratorium, based on an assessment of income of the borrower, subject to a maximum of two years.”