Loan Restructuring

Revive Your Finances: The Power of Loan Restructuring for a Fresh Start

Under loan restructuring 2.0, you can extend your loan tenure or negotiate interest rates with your lender. This can have a significant impact on lowering your monthly EMIs. If you’re considering restructuring your loan, it’s important to understand the eligibility criteria for the RBI Restructuring Loan 2.0 Scheme. Borrowers who were impacted by COVID-19 either directly or indirectly and whose loans were classified as standard as of March 31, 2021, are eligible. Once you’ve determined your eligibility, it’s time to approach your lender to discuss restructuring options. It’s important to have a clear understanding of your financial situation and what you can realistically afford in terms of monthly payments. This will help you negotiate with your lender and come to an agreement that works for both parties.

When discussing restructuring options with your lender, keep in mind that they may have their own set of guidelines and restrictions. Be prepared to provide documentation to support your request for restructuring, such as proof of job loss or income reduction due to COVID-19. If you’re able to successfully negotiate a restructuring plan, make sure you understand the terms and conditions before signing any agreements. It’s also important to continue making timely payments on your restructured loan to avoid any further financial difficulties. Remember, restructuring your loan is not a quick-fix solution and may not be the best option for everyone. Consider all of your options and consult with a financial advisor before making any decisions.

Hey there! It looks like you’re one of the many folks struggling to repay loans and credit cards due to salary cuts or job losses in this pandemic. The Reserve Bank of India recently announced a one-time restructuring scheme called the Resolution Framework for COVID-19-related Stress to help relieve some of your financial stress. Wondering whether you qualify or how to apply for loan restructuring? We’ve got you covered. This article will walk you through everything you need to know about the RBI’s restructuring scheme 2.0, eligibility criteria, documents required, how much relief you can expect, and the step-by-step process to restructure your loans. By the end, you’ll have a clear understanding of the options available to restructure your debt and be able to make an informed choice on the best path forward. Let’s dive in!

RBI’s Restructuring Loan 2.0 Scheme: An Overview

The RBI introduced Resolution Framework 2.0 in August 2020 to provide relief to small businesses and individuals affected by the COVID-19 pandemic. Under this scheme, the RBI allowed lenders to restructure loans of up to ₹25 crore for MSMEs and ₹2 crore for individuals and small businesses. If you have an existing loan that qualifies under this framework, you can apply to your lender—whether a bank, NBFC, or microfinance institution—to restructure your loan. This could mean a moratorium of up to two years on principal repayments, converting interest accrued into a funded interest term loan, and extending the loan tenor by up to two years. To be eligible, your loan should have been classified as ‘standard’ as of March 1, 2020. We will implement the restructuring by March 31, 2021. Loans restructured under this framework will be classified as ‘standard’ upon restructuring. This is a one-time scheme, so if you want to ease your repayment load, you should apply as soon as possible. The lender will evaluate your loan based on its viability and creditworthiness. If approved, the new repayment schedule will kick in immediately.

Some key points to note:

• Interest will continue to accrue on the outstanding principal portion of the loan during the moratorium period.

• The overall loan tenure may increase by up to 2 years. This means your loan maturity date and final payment will be extended.

• Your credit history will not be impacted if you opt for restructuring under this scheme. However, the restructured loan details will be reported to credit bureaus.

• You can apply for restructuring on multiple loans if you have more than one that qualifies. But the overall relief will be capped at the limits specified, i.e., ₹25 crores for MSMEs and ₹2 crores for individuals and small businesses.

Qualifying Loans and Borrowers Under the Scheme:

So you have a loan that you’re struggling to repay due to financial hardship from COVID-19? The RBI’s new restructuring scheme could be your lifeline. Under the scheme, both individual and business borrowers of qualifying loans can get relief. To qualify, your loan must have been classified as ‘standard’ as of March 1, 2020. This includes term loans, working capital loans, loans for business purposes, and personal loans. Now, if you’ve defaulted on any payments between March 1 and August 31, 2020, don’t worry; your loan can still be restructured if you pay all overdue payments by September 30. Both salaried and self-employed individuals can apply, as well as MSMEs and businesses in the 26 stressed sectors identified by the Kamath panel. Loans of up to Rs. 25 crore can be restructured. The restructuring will be done by rescheduling payments, converting interest accrued into a funded interest-term loan, and altering loan tenors. Lending institutions have been directed to frame restructuring policies within a week of the scheme’s announcement. So contact your bank or lender as soon as possible to discuss restructuring your loan under this scheme. They will evaluate your loan based on pre-COVID cash flows and determine the resolution plan on a case-by-case basis. This is a major step by the RBI to help relieve the debt burden for those facing hardship. If your loan and situation meet the qualifying criteria, be sure to avail yourself of this opportunity to restructure your loan on easier terms. Every little bit helps in times like these!

Key Features of the Restructuring 2.0 Scheme:

Increased loan tenure:

Under the RBI’s Restructuring 2.0 scheme, the overall loan tenure can be increased by up to 2 years. This means that if you had a home loan with a 20-year tenure, it can now be extended to 22 years. The increased tenure will lower your EMI amount, providing some relief.

Moratorium period:

A moratorium period of up to 2 years can be granted, during which you only need to pay interest on the loan. The principal amount of repayment can be deferred. This can help free up your cash flow for other essential expenses during a financial crisis.

Interest rate concessions:

Lenders may offer interest rate concessions or waivers of up to 2% for the moratorium period. The final interest rate post-restructuring will be subject to an internal assessment by your bank or NBFC. Some borrowers may be offered a step-up interest rate, where the interest rate increases gradually over the loan tenure.

Penalty waivers:

As part of the restructuring, lenders will waive penal charges like prepayment or foreclosure charges. Processing fees and administrative charges related to restructuring may also be waived. This can help reduce your overall interest costs.

Security requirements:

There are no changes to security requirements. Existing securities like property papers, guarantees, etc. will continue post-restructuring. No additional security or collateral will be asked for.

The Restructuring Loan 2.0 scheme aims to ease some of the stress for borrowers facing financial difficulties due to the COVID-19 pandemic. By increasing the loan tenure, and offering a moratorium and interest rate relief, the scheme makes loan repayments more sustainable and affordable during these challenging times. If you are facing issues repaying your home or other loans, do reach out to your lender to explore restructuring options.

How to Apply for Loan Restructuring Under the Scheme:

So you have an existing loan that you’re struggling to repay due to financial difficulties brought on by COVID-19. Don’t worry; the RBI has introduced the Restructuring of Loans 2.0 scheme to provide relief. Here’s how you can apply:

Check Loan Restructuring Eligibility:

To be eligible, your loan should have been classified as ‘standard’ by the lender as on March 1, 2020. The scheme covers personal loans, auto loans, home loans, loans against property, and more. Your total exposure including non-fund based facilities should not exceed ₹25 crore.

    1. Submit an Application to your Lender

    1. Reach out to your lender, like a bank or NBFC, and apply for restructuring your loan. You’ll need to provide details like the loan account number, amount overdue, and reasons for financial hardship. The lender will then assess your eligibility under the scheme.

    1. Propose a Revised Repayment Plan

    1. If eligible, submit a proposal for restructuring your loan. This could include reducing your EMI amount, extending the loan tenor, or a combination of the two. The lender may ask for supporting documents to evaluate your proposal.

    1. Finalize the Terms

    1. Once your lender approves the restructuring, they will share the revised loan terms and agreement with you for your consent. This may include a lower rate of interest, a longer repayment period, and/or a principal moratorium. Review and sign the agreement to finalize the restructuring.

The RBI has allowed a moratorium of two years for all restructured accounts. So if needed, you can avail of a principal moratorium of up to 24 months, during which you only need to pay interest, and the principal EMI will restart after the moratorium period. The overall loan tenure may be extended by up to 5–10 years as per the scheme. This is a great opportunity to make your loan repayments more sustainable during tough times. Contact us as soon as possible and make use of the RBI’s restructuring guidelines to ease your burden. Best of luck!


So there you have it—everything you need to know about the RBI’s latest loan restructuring scheme. The bottom line is that this new scheme gives those with loans a chance to restructure and make their EMIs more manageable during these difficult times. While the rules around eligibility and approvals may seem complex, don’t let that discourage you from exploring if this could provide some relief. At the end of the day, every little bit helps. If your loan qualifies, it’s worth putting in the effort to apply; your future self will thank you. The pandemic has been hard on everyone, but there are still resources available to help us navigate through it. This restructuring scheme is one of them. Take advantage of it and keep your head up; better times are coming!

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