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Loan reconstruction is a process that helps the borrowers to reschedule their loan payment or get lower interest rates on their existing loans like home loans, personal loans, and more depending on the agreement done with the bank. RBI has announced a one-time restructuring scheme for lenders that can help the borrowers to pay the EMIs easily without any payment defaults.
Banks can invoke restructuring of eligible loans till 31st December, 2020 as per RBI. Loan reconstruction scheme is applicable on all personal and corporate loans that are affected due to COVID-19 lockdown. Those financial providers whose total loan outstanding amount is less that Rs. 25 crores are not eligible.
This will benefit those borrowers who are regularly paying their loan amount to the banks. Reconstructing the loan eligibility criteria will help in repayment of loan easy for the borrower. The payment terms can be rescheduled, any interest accrued can be converted into a small loan that can be repaid within two years.
Those who are eligible for personal loan their account will be maintained as standard account rather than a defaulter one. This will remain standard in the lender’s book until the date the borrower and lender agree to proceed with reconstruction of the loan.
Banks and financial institutes will be allowed 90 days at a stretch to implement the reconstruction plan for the loan. If they fail to implement any resolution plan within this time limit then they will not be given any benefit under this scheme. Apply for the loan here.
Those lenders who agree for reconstruction of loans would have to sign the inter-creditor agreement within 30 days of loan reconstruction. The reconstruct proposal will be approved by the lenders and then borrowers will get it sanctioned.
How To Check Borrower’s Eligibility?
A borrower in order to take the reconstruction loan should come under any of the given conditions due to COVID-19:
- If the salary of August 2020 is reduced as compared to February 2020
- Loss of job or business closure
- Closure of units, factory, shop in case of self-employment
How To Check Loan Eligibility?
Not all loans will be considered eligible for reconstruction loan, following conditions need to be fulfilled:
- The loan should be a ‘standard loan’ and should not be in the default list for more than 30 days as of 1st March, 2020
- Your business or job should be affected by the COVID-19 crisis and your eligibility criteria should meet up the conditions for the loan
- If you have applied for a loan after 1st March 2020 then you are not eligible for this loan
Documents Required
- Salary slip of February 2020 and the current month’s salary slip
- Declaration of estimated salary immediately after 24 months
- In case of job loss, a relieving letter should be submitted
- Declaration by self-employed people that the business is affected due to COVID-19
How To Avail Restructuring Loan?
You can easily apply online on any website where this loan facility is available. Submit an application for restructuring the loan along with the scanned copy of your required documents. The bank will review the application along with your documents. The bank will inform the borrower about the rejection or acceptance of the application.
The borrower will have to visit the branch for accepting the resolution plan given by the bank. The borrower is required to give proper documentation within 30 days from the date of implementation of the loan. If the borrower fails to do so then the application will be canceled.
The bank might ask for additional documents to make things more clear before giving the loan to the borrower. The decision given by the bank will be final as far as eligibility is considered under this framework. So, while you apply for this loan there will be provisional eligibility that will remain unchanged.
Which Loans Are Covered In This Framework?
Housing, education, auto, and personal loans are widely covered in this kind of framework where borrowers can get the required help of finances with eased of EMIs.
What Is Moratorium?
During the moratorium period, the borrower will not have to pay EMIs on the loan.
Will there be Any Change in EMI?
Yes, the borrower will have to pay the EMI after the moratorium is calculated and advised by the bank.
