With a view to strike a balance in providing further relief to the borrowers and finding a solution to the problem faced by lenders of non-realization of EMI on account of moratorium, RBI has come up with One-time Restructuring of loans vide notification dated 06th August, 2020. This proposed restructuring is addressed to all the Commercial Banks, Co-operative Banks, Small Finance banks, NBFC’s & Housing Finance companies across India.

Which Loans are eligible for restructuring?

RBI has proposed to restructure all the personal loans and consumer credits which includes:

  • Gold Loan
  • Home Loan
  • Vehicle Loan
  • Personal Loan
  • Consumer Durable Loan
  • Education Loan
  • Marriage Loan
  • Loan against securities

 Note: Any loan acquired for commercial or business purpose is excluded for above restructuring

What are the types of restructuring?

RBI states that banks must formulate Board approved policies for restructuring and after evaluating the current situation of each borrower the loan can be restructured in any of the following ways:

  • Reschedule Loan repayments
  • Conversion of interest accrued or to be accrued into a separate loan facility
  • Extension of Loan Tenor
  • Granting further moratorium for maximum 2 years

Which borrowers are eligible?

Since the above framework is introduced to help the borrowers facing liquidity issues due to COVID-19, the reference date for the outstanding loan is considered as 01st March, 2020. Borrowers who were classified as Standard and were not in default for more than 30 days as on 01st March, 2020 shall only be eligible for the above restructuring. Also, the restructuring shall be eligible, only if the borrower is under stress due to COVID-19 and no other reason shall be considered.

Till when borrower can apply?

Eligible borrowers will be classified as Standard till the date of invocation of resolution under` this framework. As per RBI, date of invocation shall be the date on which both the borrower and lending institution have agreed to proceed with a resolution plan under this framework.

Resolution under this framework must be invoked latest by December 31, 2020 and must be implemented within 90 days from the date of invocation.


The country being under Mission Begin Again motto and the release of the framework at the time when earlier six months moratorium for the EMI is about to end on 31st August, 2020 indicates that further moratorium may not be granted and aims that payment of installment must be started, though with a restructured figure.

The above framework targets majority of the loans availed by individual borrowers and tries to help them in repaying the loan as per their current repayment capacity as compared to the repayment capacity when the loan was availed. This will help those individual borrowers who have faced salary cut or lay off.

However, borrower must ensure that blindly restructuring of the loan must not be followed as it comes up with huge additional interest burden and thus decision must be taken after assessing the current and future prospects.

Source: https://rbidocs.rbi.org.in/rdocs/notification/PDFs/NT168F87DBE0F71643B3B17BC8278108C16B.PDF


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Company: Kailash Chand Jain & Co.
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October 2021