The Reserve Bank of India (RBI) has announced Resolution Framework 2.0 during its last monetary policy. This allows lenders to restructure loans of individuals and small businesses.
Market experts opine that this announcement has much more clarity for both borrowers and lenders as compared to the previous year’s framework.
According to Pranjal Kamra, founder and CEO – Finology, banks will form a board to approve businesses that apply for loan restructuring and businesses would get their acceptance or denial within 30 days of application.
Loan restructuring could be done, Kamra explained, by reducing EMIs, increasing the term of the loan or converting interest obligations into loans. In any of these methods, the total tenure of the loan restructured should not extend 2 years.
It's important to note here that the ones who availed benefits under framework 1.0 will also be enabled to secure additional borrowings under the second framework.
Praising the initiative, Kamra said, "This loan restructuring would provide much relief in these troubled times as it would solve liquidity issues for these businesses which are already facing disruption in their operations and that too without classifying them as NPAs."
Abhishek Soni, CEO and co-founder of Upwards further said these measures allow lenders to restructure the loan accounts of distressed borrowers such that they can come out of COVID issues and repay their loan comfortably.
“While there is no moratorium this time and the scope is relatively narrow, this will definitely help the most impacted borrowers effectively tide through the new COVID crises and financial issues,” he says.
Anil Pinapala, Founder and CEO of Vivifi India Finance Private Ltd also calls the new restructuring scheme the right step to help borrowers recuperate and recover from the losses, and bounce back to the new normal, sooner or later with adequate time and funds in hand.
It must be noted that the RBI in 2020 allowed all lending institutions to allow borrowers to put off repayment of term loans for six months (March to August). That moratorium applied to all categories of borrowers.
However, this time, there is no such relief.
(Edited by : Jomy Jos Pullokaran)