RBI on 05th may 2021 has announced Resolution
Framework 2.0 for individual borrowers, small businesses, and MSMEs. RBI has
made several announcements to tackle the second wave of the pandemic that’s has
hit our country. The key announcement was regarding Resolution Framework
2.0. RBI announced the framework under
which loans can be restructured during this difficult time.
The second wave of the pandemic has hurt many businesses and
salaried class people as well. Many of the people have lost their jobs and many
of the businesses are shut down due to the pandemics and the ongoing curfews
and lockdown situation. In this condition, people may find it difficult to continue
the repayment of their loans. Hence the
resolution framework is much-needed support from RBI.
The RBI has released a detailed circular on 05th
May 2021 as Resolution Framework 2.0 – Resolution of Covid-19 related stress of
Individual and Small Businesses.
The RBI has not opened any window for a blanket moratorium
for loans this time as it did in previous Resolution Framework 1.0. However, it
has made an option to avail a moratorium period of up to two years through restructuring
of their loans i.e. revising the repayment schedule. The overburdened borrower
may feel this as a big relief from the central bank.
Who can avail moratorium?
Individuals with loan exposure of less than Rs. 25.00 crores
as of 31st March 2021. The loan should have been classified as standard
as of 31st March 2021. The borrowers may apply for restructuring up
to 30th September 2021 and the same shall have to be implemented
within 90 days from application. Borrowers who have not availed of the facility
under Restructuring framework 1.0 are permitted to take a moratorium period of
up to two years.
Those who have already availed of the moratorium under
Resolution Framework 1.0 may also apply this time but the total moratorium of resolution
framework 1.0 and 2.0 shall not exceed 24 months. The extension of the residual tenor of the
loan facilities may also be granted to borrowers subject to, the overall cap on
the extension of residual tenor, inclusive of the moratorium period should not
exceed two years.
Suppose you have availed the facility under Resolution
framework 1.0 and availed a moratorium period of 6 months and the loan tenor increased
by 4 more months after the loan gets restructured. The total restructuring period comes to 10 months.
Now you can again avail of restructuring under the resolution framework 2.0 for
14 more months.
The borrowers may apply for restructuring up to 30th
September 2021 and the same shall have to be implemented within 90 days from
application.
Should you opt for it?
The terms of the restructuring will be decided by the bank. The
bank may also charge an increased rate of interest on the loan being
restructured. Whether or not the residual tenor of the loan can be increased
will be assessed by the bank. The banks will also exchange the terms of the agreement
as per the revised loan with the borrower.
If the pandemic has really affected your income and you find
it difficult to repay your loan, then you can proceed to avail of it.
Otherwise, it will only increase the interest on your loan amount. Also, the
CIBIL report may show the status of your loans as ‘Restructured’ which may
affect your credit score.
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