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RBI’s Restructuring 2.0: What is it, Who is Eligible & More FAQs

The second wave of the Covid-19 pandemic has battered the nation in devastating ways. Families have lost their dear ones, businesses have been shut down, and individuals have lost their incomes and jobs. The second wave has caused the economy to stagnate, making it extremely challenging for millions of individuals and businesses to stay afloat. 

In these financially stressed times, the RBI (Reserve Bank of India) has offered restructuring options to borrowers who have a hard time repaying their loan EMIs on time. Unlike the first Covid-19 relief package, no moratorium has been announced this time. However, other relief measures have been introduced to reduce the financial burden of borrowers. 

Key Highlights of Restructuring 2.0 

In an exclusive address regarding the new package, RBI governor Shaktikanta Das announced the details of Resolution Framework 2.0. 

Who is eligible for restructuring 2.0? 

Eligible borrowers can apply for restructuring at their respective lenders until 30th September 2021. Once applied, the lender has to implement the resolution and restructuring plan within 90 days. 

What are the products covered under Restructuring 2.0? 

The following loan products are covered under the Resolution Framework 2.0:

*Note that the actual list depends on the lender. The RBI has permitted lenders to draft their own rules for implementing the Resolution Framework 2.0. 

Which loans are not eligible for Restructuring 2.0? 

How to avail the restructuring benefit for my loan? 

The actual steps vary from lender to lender. We list out the general steps to be followed:

*Note that the lender has to implement the restructuring within 90 days once you submit the proposal. 

Can I apply for restructuring several times on a single loan? 

No, you can apply only once. Also, remember that it’s not mandatory for the lender to agree to restructure the loan. They can accept or reject your application at their discretion. 

Can I apply for restructuring on multiple loans? 

Yes. You can apply for restructuring on one or more loans as required. The lender may accept or deny your request after considering each loan’s viability and repayment potential separately. 

I had already applied for restructuring last year. Can I apply again? 

Yes. But you can get the tenure of the outstanding loan extended only by 24 months for both times together. For example, suppose you had availed an extension of loan tenure by 12 months last year. In that case, you can get an additional tenure extension of 12 months this time, making the total relief up to 24 months. 

What are the restructuring options available to borrowers? 

Borrowers can choose from any of the following options:

What are the documents required to apply for restructuring 2.0? 

You will have to provide supporting documents regarding your income, employment status and how it has been affected by the pandemic. Following are the general documents that you have to submit:

Will restructuring impact my credit score/report? 

Yes, the lender will report the loan as restructured to the respective credit bureau(s). This will be noted in your credit report and can cause your credit score to drop. Note that a loan marked as restructured makes it challenging to get approved for future loans and credit cards. 

I have taken a loan with a co-applicant. Do I need the permission of the co-applicant for restructuring? 

Yes. As per regulatory requirements, all borrowers and co-applicant(s) must sign the document regarding restructuring changes to the loan. 

Final Thoughts

The RBI has once again provided financial relief to borrowers struggling to repay EMIs during these challenging times. However, keep in mind that restructuring is NOT a free pass to override your loan obligations. Restructuring an ongoing loan has long-term repercussions. It impacts your credit score and report. It also increases the overall interest outgo, thereby increasing your financial burden after the interim moratorium period. 

So, go for restructuring only if you’re in a dire financial situation and stand the risk of defaulting on loan payments. The best way forward is to continue repaying your loan EMIs on time as per the current schedule and avoid unnecessary expenses till your financial situation stabilizes. 

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