In a bid to provide relief to small borrowers amid the second wave of COVID-19 pandemic, Reserve Bank of India (RBI) on Wednesday announced loan restructuring plans. “Resurgence of COVID-19 pandemic in India in recent weeks and the associated containment measures adopted at local and regional levels have created new uncertainties and impacted the nascent economic revival that was taking shape. In this environment, the most vulnerable category of borrowers are individual borrowers, small businesses and MSMSEs," RBI governor Shaktikanta Das said while addressing the media.
RBI’s loan-restructuring plan 2.0
Shaktikanta Das announced a second round of loan restructuring for individuals and small businesses and MSME borrowers who did not avail the facility in the previous round. Under Resolution Framework 2.0, one can opt for loan restructuring option for up to Rs 25 crore dues.
“Borrowers having aggregate exposure of up to ₹25 crore and who have not availed restructuring under any of the earlier restructuring frameworks (including under the Resolution Framework 1.0 dated August 6, 2020), and who were classified as ‘standard’ as on March 31, 2021 shall be eligible to be considered under Resolution Framework 2.0," the central bank mentioned.
Last day for applying loan-restructuring
Banks and lending institutions can invoke restructuring under the proposed framework till September 30, 2021. The loan moratorium needs to be implemented within 90 days after invocation.
“This could be considered a very good step to support small and medium term enterprises and various other factors have been looked upon to tackle the pandemic. These measures would bring out a positive outlook for the economy. It would help boost business sentiment and will be one of the ways to overcome cash crunch which is being faced by mostly every individual as per today," said Nitin Shahi, executive director of Findoc, Financial services group.
For those who took one-time loan restructuring option earlier
Banks and lenders can extend the loan-restructuring option for up to two years for those who had opted to moratorium in the earlier round. Small-business owners and individuals can avail this option to pay their dues, the central bank said.
“In respect of individual borrowers and small businesses who have availed restructuring of their loans under Resolution Framework 1.0, where the resolution plan permitted moratorium of less than two years, lending institutions are being permitted to use this window to modify such plans to the extent of increasing the period of moratorium and/or extending the residual tenor up to a total of 2 years. Other conditions will remain the same," Das said.
“This welcoming move was the need of the hour, since individuals and businesses have been gravely affected by the pandemic’s second wave and lockdown-like situations, resulting in an acute economic stress on states. The RBI’s decision will provide the necessary headroom to the financial institutions to effectively re-evaluate their working capital and will work towards positively impacting the general sentiment in the economy,” said Madhusudan Ekambaram, co-founder and chief executive officer, KreditBee and Co-Founder, FACE (Fintech Association for Consumer Empowerment).