Loan Restructuring 2.0 - Meaning, Eligibility & How to Apply

The common man’s finances have had to bear the hardest blow as a result of the COVID-19 pandemic. The country has witnessed loss of life, loss of income, loss of jobs which has made it even more difficult for individuals to service their existing financial commitments, including all types of loans. The situation worsened with the 2nd wave of the pandemic in early 2021, causing a second round of lockdowns to be enforced across the country. Thus, businesses and income which were just picking up had to face hardship all over again.

To provide relief, the Reserve Bank of India in 2021 announced the Loan Restructuring 2.0 Scheme to combat financial stress incurred by borrowers as a result of COVID-19.

Therefore, if you are considering applying for Loan Restructuring 2.0, here is all that you need to know about the scheme. Read more to find out if you are eligible to apply for it, how the process works and if you should avail the scheme at all.

Who is Eligible for Loan Restructuring 2.0 Scheme?

The Loan Restructuring 2.0 Scheme announced by the Reserve Bank of India can be availed by borrowers who have been making regular payments on their loan account. The scheme also required that the loan accounts should be classified as ‘Standard’ as on March 2021. If the loan account has not been regularly serviced by the borrower in a timely manner, then it will be classified as a defaulting account and categorised as substandard after a designated period of time. Such a category of borrowers will not be eligible for Loan Restructuring 2.0. 

In addition to that, the RBI scheme would make most MSME borrowers ineligible to apply for the restructuring if they had already availed any previous loan restructuring framework. This included the Resolution Framework 1.0 that was announced by the Reserve Bank of India in August 2020. On the other hand, individual borrowers who had their accounts restructured previously can still apply for loan restructuring 2.0 as long as the tenure extension does not exceed 24 months. The RBI guidelines also stipulate that the combined effect of all schemes including this scheme on the tenure extension should not exceed 24 months.

Moreover, there may be other criteria which individuals and MSME borrowers qualify for this scheme. If you are an existing SMFG India Credit customer, you can refer to the detailed policy to know more.

What Kind of Loans are Eligible for Restructuring?

The RBI restriction was designed to accommodate all types of retail loans like home loans, top-up home loans, personal loans, car loans, education loans, and gold loans in addition to popular credit card products. 

If you are a prospective applicant and wish to check if your existing loan at SMFG India Credit qualifies for restructuring, you can use the loan Restructuring calculator on the website to get a near accurate assessment.

Must Read: All You Need to Know About Loan Restructuring Scheme

What are Your Options Under Restructuring?

You have two options at your disposal if you avail of RBI’s loan restructuring scheme. You may either request for a EMI moratorium (popularly referred to as EMI moratorium 3.0 by netizens),  or your EMIs for a few months.

Alternatively, you can pay a slightly reduced EMI.

In both cases, your tenure will get extended, and your overall interest payable will increase, thereby making your loan more expensive. . Please note that the options available to you will depend on a number of factors including your eligibility for this scheme, your repayment capacity, the regulatory guidelines, and SMFG India Credit’s policy.

Will Only Commercial Banks Offer Restructuring?

There is no restriction of the Loan Restructuring 2.0 Scheme which enables any lenders to extend the facility to their borrowers if they meet the predetermined eligibility parameters as outlined by the Reserve Bank of India. This essentially means that in addition to commercial banks, non-banking financial companies, co-operative banks, foreign banks, housing finance companies and regional rural banks are authorised to extend this to their customers.

How Long Will it Take For Your Application To Be Processed?

While the Reserve Bank of India has shared eligibility guidelines under the Loan Restructuring 2.0. ultimately the request to approve the request and thereby grant a moratorium or EMI reduction  is at the discretion of the lender. Lenders have 30 days to accept or reject applications for this scheme. If your request gets accepted, you will be contacted by representatives to discuss the terms of restructuring. Upon receiving your acceptance, the scheme will be invoked on the date of invocation. The last date of invocation is Sep 30, 2021. Thus, if you need to apply for this scheme, you are advised to do so at least 30-40 days in advance, and keep all required documentation ready.

Will Availing The Loan Restructuring Scheme Impact Your Credit Score?

Any borrower opting for the loan restructuring scheme will have it reflected in their credit reports and history. This will be highlighted under the category tagged as "Account restructured under COVID 19". 

Must Read: 5 Situations When Loan Restructuring Might Not Be a Good Idea

Challenges In Getting Loans In Future

Any borrowers opting for loan restructuring are victims of an economic situation that is beyond their control. However, if you can manage to pay your EMIs, you should certainly choose to do so, and not opt for the scheme needlessly.

If you are unable to manage the stress of multiple loans, you can opt for a personal loan for debt consolidation with SMFG India Credit. You can use the personal loan emi calculator to calculate the amount of monthly instalments for the personal loan, and our personal loan eligibility calculator to estimate the maximum amount that you may be eligible for. With quick turnarounds and minimal paperwork, it is important that you have access to funds to meet essential needs yet keep an avenue of credit open in the future.