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Exemption from loan EMI repayment completed, find out how the Reserve Bank's loan restructuring policy will affect you

Exemption from loan EMI repayment completed, find out how the Reserve Bank's loan restructuring policy will affect you



  • The Reserve Bank allowed banks to restructure loans
  • The loan repayment period cannot be extended beyond two years



The Reserve Bank of India (RBI) on August 6 closed its loan waiver scheme to prevent the spread of the corona virus. That means you will have to pay the installment again from September. Failure to do so will result in a worsening of your credit score. However, the RBI has allowed banks to restructure loans. Find out how the new RBI announcement will affect you.

What is the decision of RBI?


The economy has slowed down due to the corona virus. In such a situation, recovery of loans given by banks is difficult. With this in mind, many borrowers are unable to repay their loans on time even if they want to. They needed relief.
In such a scenario, the RBI announced a moratorium on EMI on all term loans from March 1 to May 31, 2020 in March 2020. That is, if you do not pay the installment, your credit score will not be affected.


This was later extended to three months until August 31, 2020. No increase was announced in the monetary policy on Thursday. That is, the mortuary plan is closed.

This simply means that from September you will have to pay installments on your home loan, vehicle loan and personal loans as before March. Credit score will be affected if payment is not made.
Banks also sought permission for loan restructuring. The RBI has approved it. Now, banks can change the loan repayment schedule of their loan holders, extend the period or give payment holiday.

What effect will loan restructuring have on consumers?



  • The Reserve Bank has allowed all banks to restructure loans. It mentions personal loans  no separate provision for home loans, vehicle loans and other loans.
  • If you are unable to repay a home loan or vehicle loan even after the moratorium has expired, you will need to contact your bank or financial institution. It can restructure loans on a case-by-case basis.
  • According to Shalini Gupta, chief strategy officer of Myloncare, the restructuring has been approved. But who will benefit from it, only the banks will decide.
  • Experts say the RBI has set provisions for MSME and corporate loans as well as personal loans. The Reserve Bank should also clarify what will happen to home loans and vehicle loans.
  • However, the RBI has allowed restructuring of loans only to borrowers who do not have a default of more than 30 days as on March 1, 2020.
  • Old defaulters will not be accommodated in this plan. Banks will have to make additional provisions on outstanding debts after recovery. This means that the resolution plan will be for new defaulters only.

What is the difference between EMI moratorium and loan restructuring?


Exemption from paying EMI under moratorium. In the meantime, the interest accrued is added to the bank principal amount. You will have to pay interest on that amount when the EMI resumes. That is why interest rises on interest.
Loan restructuring is different. Banks get more rights in it. Banks can decide whether to reduce EMI, increase the loan period, charge interest or adjust interest rates.

How will restructuring be done in personal loan?


The RBI has also approved one-time restructuring in personal loans. However, banks or financial institutions will not be able to restructure retail loans to their own staff.
This account should be standard by March 1, 2020. It should not have a default of more than 30 days.
If you are unable to pay the personal loan installment, then you can apply for restructuring before 31st December. Banks will have to decide on these applications within 90 days.
Banks and financial institutions will be able to extend the loan repayment period up to a maximum of two years. They will be able to make decisions based on the person's income.
SME loan restructuring

The RBI has also allowed one-time restructuring to micro, small and medium enterprises. The scheme will be available to MSMEs with outstanding loans up to Rs 25 crore.
The loan restructuring of MSMEs should be done before March 31, 2021, the RBI said. Under these guidelines, an additional 5% provision has to be made for accounts on loan restructuring.
The one-time restructuring plan was announced in January 2019. It was later extended in February 2020. Now MSME has been expanded to provide additional benefits due to Corona virus.

How will corporate loans be restructured?


Banks can implement the scheme by December 31, 2020. If the borrower submits to the bank, the banks have to submit the solution within 180 days.
Before restructuring, banks and financial institutions will have to provide an additional 10% of the total debt. If the inter-credit agreement is not made within 30 days, an additional provision of 20% will have to be made.



M.V. A committee has been formed under the leadership of Katham which will set a specific area benchmark for the resolution plan. The committee will also decide on a resolution plan for a loan of Rs 1,500 crore or more.

In cases where the total loan is Rs. 100 crore, banks will have to evaluate the credit of the resolution scheme from an accredited credit rating agency.