What is Loan Restructuring?
Loan Restructuring fundamentally means the modification of the loan terms and conditions. When a borrower faces financial distress, he can opt to revisit, negotiate and revise the loan terms and reduce the chances of any payment default. The loan restructuring process can be initiated by extending the loan tenure with or without changes in the rate of interest.
What is a one-time loan restructuring scheme?
As per the Reserve Bank of India (RBI) directives, banks and financial institutions can implement a recuperative plan for their financially affected customers trapped in the economic fallout that resulted from the COVID-19 pandemic. The resolution plan can also permit additional credit facilities or extend the remainder loan tenor by a moratorium not exceeding 2 years. The one-time loan restructuring scheme can be availed by individuals and entities who are likely to default their EMIs due to loss of income compelled by the pandemic. They must also not have any overdue EMI for more than 30 days as of 1st March 2020. For MSMEs, this period is 89 days, who have availed a loan of less than 25 crores. Lending banks can recognize these loan accounts as standard and need not book them as Non-performing assets (NPAs).
Original Source - One Time Loan Restructuring
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