EMI Moratorium: Restructuring of Home, Auto and Personal Loans in accordance with RBI Circular – Explained


Resolution plans may include changing the terms of advances, restructuring, rescheduling of payments, granting moratorium, etc.

The RBI EMI moratorium on loan repayments ended on August 31, 2020. It will not affect those who did not take advantage of the moratorium and continued to pay EMIs on their home loan, car loan or Personal loan. However, for those who took advantage of the moratorium and did not pay the installments by the due dates, the outstanding installments must be paid now.

There are a few options for those who have taken advantage of the RBI’s EMI moratorium scheme. One can repay the unpaid installments or approach the bank for further restructuring based on the RBI Restructuring Circular issued in August 2020. But, before choosing the restructuring option, there are also some important precautions to be taken . Read on to know them.

Before you know this, you need to know how the payment process will work during the restructuring – “The RBI COVID-19 regulatory packages allow the repayment schedule for these loans to be shifted, as well as the remaining term, by six months after the Generally, outstanding EMIs will be paid in accordance with the revised schedule and accrued interest is added to the balance amount, resulting in a further increase in the term of the loan or a pro rata increase in the amount of the EMI, depending on However, this may vary depending on the policy approved by the board of the lender,” says Veena Sivaramakrishnan, Partner, Shardul Amarchand Mangaldas & Co.

Banks offer restructuring options and, depending on the amount of outstanding principal, one can defer the outstanding principal to the end of the term. However, the actual restructuring will depend on a case-by-case basis depending on the terms set by the lender. “RBI has allowed lenders to allow one-time restructuring of business loans without change of ownership and personal loans while maintaining standard asset classification, see COVID-19 Stress Resolution Framework Circular dated of August 06, 2020″, informs Veena.

But will all loan accounts and any borrower be eligible to benefit from the RBI restructuring programme? Veena says: “RBI has prescribed that borrower accounts which were classified as standard, but which have not been in default for more than 30 days, as of March 1, 2020, will be eligible for restructuring under the Circular of restructuring. In this regard, based on the recommendations of RBI’s Kamath Committee, the lenders will establish a Board-approved policy to provide relief to eligible borrowers under the Restructuring Circular, which will provide additional insight to borrowers. .

The shortage of liquidity persists in many sectors of the economy, thus also affecting individual borrowers. Not all borrowers may be able to start paying EMI from September. It is best to approach his lender and ask the bank to restructure the loan quoting the RBI Restructuring Circular.

“In such scenarios, the eligible borrower can contact the relevant lender to seek relief under the Restructuring Circular. business loans, the borrower should benefit from the relief accordingly.Resolution plans may, among others, include changing the terms of advances, restructuring, rescheduling of payments, granting a moratorium, etc. Therefore, subject to the policy approved by the board of the lender in this regard, a request for a resolution plan may be made to the relevant lender citing relief under the restructuring circular,” suggests Veena.

Finally, there are some important precautions for someone who wishes to opt for the restructuring of their loans. “A resolution plan under the Restructuring Circular must be invoked no later than December 31, 2020. Therefore, affected borrowers should contact lenders keeping in mind the timeline prescribed by RBI. Borrowers should also be willing to provide additional collateral or guarantees and covenants to ensure that a lender is able to make a decision and provide the necessary relief. Expecting a loan to continue, with financial discipline waivers, etc. but without providing any guarantee or additional comfort is completely unreasonable. Ultimately, banks and NBFCs are managing the lending activity and expecting returns to be able to hold up,” Veena says.


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