Everything you need to know about RBI’s Loan Structuring Scheme

The economic fallout due to the pandemic left millions with severe economic hardships. Both business owners and employed individuals had a tough financial time last year, especially those who had loans to their names.

To offer relief, RBI announced a loan moratorium and loan restructuring policies. This allowed individuals and businesses to put their loans on hold or modify their original loan terms.

However, due to COVID-19’s second wave, many borrowers are facing a financial crunch again. Considering the situation, RBI has renewed its loan restructuring policies to help micro, small, and medium enterprises (MSMEs), small businesses, and individual business loan borrowers with their loan repayments.

Here’s all you need to know about the restructuring scheme and its various aspects.

What is loan restructuring?

Restructuring is a process through which loan borrowers facing financial distress can renegotiate the loan terms to avoid non-repayment or EMI defaults. It helps borrowers increase their repayment tenure, reduce the loan EMI, or change the repayment frequency.

Who is eligible?

The scheme is open for individual business loan borrowers, MSMEs, and small businesses. However, you can only avail of the restructuring benefits if:

• If you have an outstanding business loan dues of up to Rs. 50 crore
• If RBI has classified your account as standard as of March 31st, 2021
• If you didn’t avail of loan restructuring under any previous restructuring scheme

Benefits of the loan restructuring scheme

Under the restructuring scheme, you can extend your loan tenure by two years and also get a loan moratorium for the same period. Here, the moratorium is a duration in which one doesn’t have to pay the loan EMIs. During your moratorium period, the interest is applicable, and it continues to accrue on your repayment liability.

Also, if you had your loan account restructured last year, you are still eligible for the loan moratorium. However, your remaining tenure can only extend up to two years.

The scheme is open until September 30^th 2021, and you can apply for it by getting in touch with your lender. But remember that the moratorium period will begin after 90 days from the date of application.

Additional Read: RBI Loan moratorium Extension: Repayment period extended

Should you restructure your loan?

Any tenure extension or moratorium period can only ensure temporary financial relief. Why? Because the overall interest payable increases upon restructuring. Loan restructuring can also impact your credit score and loan eligibility.

If you can afford to make your EMI payments on time, don’t opt for the scheme. And before you apply for the restructuring scheme, make sure it is your last resort.

Final thoughts

If you’re an existing Tata Capital customer, you can seamlessly restructure your loan with us within a few steps. All you have to do is log in to your Tata Capital account, provide a few necessary details, and we’ll take it from there. Explore our loan restructuring services and check your eligibility.

To know more, get in touch with us today!