After 3 days from today, the loan moratorium period for 6 months by the Reserve Bank of India (RBI) is ending. After the lockdown in view of the corona virus, the RBI announced a loan moratorium for three months. It was later extended for another 3 months, ending on 31 August. After the RBI extended its term for the second time, many bankers had said that the lack of loan amount would affect the health of the financial system.
Fewer people took advantage of Moratorium in second phase
The Jefferies Research Report shows that the loan moratorium figures decreased in the second phase compared to the first phase. In the first phase, 31 per cent borrowers took advantage of the loan moratorium, while in the second phase, 18 per cent borrowers (borrowers) took advantage of it. There are two main reasons behind this. Firstly, as economic activities started, borrowers also started loan repayments. The second reason is that banks too have become strict to give the benefit of moratorium.
Earlier this month, the Reserve Bank of India said that it would facilitate loan restructuring scheme to lenders. This will provide relief to those who have taken loans but are unable to make repairs in the current crisis. Under the restructuring facility, borrowers will be able to schedule loan payments in a new way. Let’s know everything about it …
What has RBI said about loan restructuring?
RBI has announced a One-Time Restructuring Scheme for lenders. Under this, the repayment terms of the loan can be changed. Under this, the account of borrowers will be kept standard. They will not be marked as a defaulter or non-performing loan account. Usually such account is declared as NPA account 90 days after the repair fails. [/ Ans]
How long will the restructuring window last?
According to the information given by RBI, banks will be able to restructure the eligible loans by 31 December 2020.
Cooperative banks also be restored?
Yes, RBI has approved all government banks, private banks, foreign banks operating in India, small finance banks, local area banks, regional rural banks, urban cooperative banks, state cooperative banks, district central cooperatives Banks, non-banking financial institutions, housing finance companies and All India Financial Institutions have given this facility.
Will all loans be eligible for restructuring?
This scheme is for all personal and corporate loans which are in stress due to the current crisis. There are some conditions for this. But financial service providers, MSME borrowers with a total outstanding outstanding of less than Rs 25 crore, farm credit and loans to government institutions will not be eligible for this. Primaries for agriculture would come under the ambit of restructuring loans given to agricultural credit societies i.e. PACS or Farmers Service Societies.
What are the conditions for borrowers under this scheme?
Only those borrowers who have done loan repayments on time so far will be able to take advantage of this scheme. There is also a condition that they have not kept any ammount overdue for at least 30 days till 31 March 2020.
What benefit of restructuring will people get on personal loans?
Loan restructuring for a borrower would mean that their loan terms would change. As the payment will be rescheduled, there will be changes like interest changes for small loans, grant of moratorium. It will not be for more than 2 years. All eligible borrowers’ accounts will be maintained as standard accounts.
What is the rule of banks for personal restructuring?
[ans] The lenders / banks will be given 90 days time to restructure or resolve any loan. If they fail to implement it during this period, then they will not get any benefit under the Kovid-19 loan restructuring scheme. They have to declare the loan a non-performing asset.
RBI is also forming an expert committee for restructuring. What will be its role?
An expert committee is also being formed under the leadership of veteran banker KV Kamath. This committee will advise RBI about this loan recast scheme. This committee will recommend a list of some financial parameters, which have to be kept in mind during the resolution plan. It will be on the basis of sector. The committee will also look into whether the proper resolution is being followed in the larger resolution plan.
Restructured loan is also likely to be converted into a bad loan.
What is the RBI doing to deal with it?
Under the existing rules, banks have kept 15% of their total loans for provision buffer. However, under the Covid-19 window, the RBI has asked these banks to separately keep 10 per cent of the post-negotiation debt. It will be for personal loans and corporate loans. However, for corporate loans, lenders who have not signed the ICA within 30 days of the invocation, will have to keep 20% of this amount separately.
