The loan restructuring 2.0 plan was introduced by the RBI to help borrowers hit by the financial impact of COVID-19. Many faced job losses, salary cuts, and business setbacks. In 2020, the RBI had announced loan restructuring guidelines to offer some relief.
However, even after the moratorium ended, many people continued to struggle. To address this, the RBI introduced Loan Restructuring 2.0 in May 2021. This framework provided added support, especially for individual borrowers trying to manage their loan repayments during tough times. To know more about what is loan restructuring 2.0, its benefits, and important points to keep in mind, read on.
Loan restructuring – Meaning
This RBI scheme allows borrowers to initiate the process of restructuring, meaning negotiating the loan terms with the lenders to avoid defaulting on their payments.
Individuals and business owners can ask for a lower interest rate, longer tenure, or flexible repayment options during this rearrangement.
What is loan restructuring 2.0?
In the second framework of economic reforms for people affected by the COVID-19 pandemic, the government has provided specific rules for restructuring, meaning any individual or business opting for a loan restructuring must abide by these guidelines.
It includes information on eligible loans, excluded loans, eligibility criteria and the application process. One significant change in Restructuring 2.0 is it provides additional benefits to individual borrowers, making it a popular scheme among the public.
Who is eligible for loan restructuring 2.0?
According to the loan restructuring guidelines by RBI, loan accounts classified as ‘Standard’ are eligible for restructuring, meaning only borrowers who have been making regular payments can avail of this facility. An inactive or defaulted loan account will be classified as ‘Substandard’ and will not be eligible for this scheme.
Also, MSMEs who have already applied for a loan restructuring framework are not eligible for this scheme. MSMEs also must fulfill some additional criteria to avail of this facility.
On the other hand, individual borrowers enjoy more relaxed eligibility criteria for loan restructuring, meaning even borrowers who have previously restructured their loans can apply for this scheme. The only requirement being the loan tenure extension must not exceed 24 months.
Which loans are eligible for restructuring 2.0?
The RBI guidelines include many popular loans in the restructuring 2.0 framework. Here is a list mentioning some of them.
For individuals:
Loans for Business Purposes to Individuals:
- Aggregate exposure to the lending institutions must not be more than Rs 50 Crores as of 31.03.2021.
Loans to Small Businesses:
- Must be a non-MSME (includes those engaged in retail or wholesale trade)
- Aggregate exposure is not more than Rs 50 Crores.
- Loans under e-DFS and eVFS.
Documents required for loan restructuring 2.0
Borrowers must ascertain their eligibility for restructuring, meaning they have to provide documentary evidence to show financial distress due to COVID19. The circumstances include:
-
- Reduction in salary or income
- Job loss or Closure of business
- Suspension of salary during lockdown
- Reduced activity in units in case of self-employed individuals
- Increased expenditure due to the borrower being affected by COVID-19
For non-business or personal loan restructuring, borrowers can provide these documents as evidence:
-
- Salary slips for March 2021 and the latest salary slip for the last 2 months
- Letter of discharge from the job (in case of job loss)
- GST returns from Oct-2020 to date
- Income tax returns for FY-19 & FY-20 and FY-21 (if filed)
- Declaration by self-employed professionals that their business is affected by COVID-19
For more details on loan restructuring eligibility, you can visit the lender’s website to get a list of documents needed to apply for this scheme.
How to apply for loan restructuring 2.0?
To apply for loan restructuring, you can follow the steps given below:
- Visit the lender’s website
- Fill the application with relevant personal details
- Submit the required documents
- You will receive a confirmation email or SMS.
- The lender will appoint a relationship manager (RM) for loan restructuring, meaning a representative will contact you to negotiate the new terms for your loan.
- After the new terms are approved, you can start paying back your loan accordingly.
What are the advantages of loan restructuring 2.0?
Any borrower looking for the following benefits must start their loan restructuring process immediately:
- Postpone EMIs – This scheme is a perfect opportunity if you are going through a cash crunch due to the pandemic and need to delay your payments by a few months.
- Reduce EMIs – Under restructuring 2.0, you can extend your loan tenure or negotiate interest rates with your lender. This can have a significant impact on lowering your monthly EMIs.
- Avoid Defaulting – Missing your repayments can hurt your credit score, making it difficult for you to avail of other loan benefits in future. Restructuring your loan can help you avoid such scenarios.
Can loan restructuring affect credit scores?
After your loan restructuring is approved, it will reflect in your credit reports and history. Credit Bureau will report it as ‘Account Restructured under COVID-19’. This may limit your borrowing options for a short period.
But you can always improve your credit score by repaying your loans on time. To nullify the effects of loan restructuring, 2022 will offer you many new opportunities as the world opens after the pandemic.
Conclusion
Loan restructuring, meaning a rearrangement of your loan terms, is a simple solution for the victims of an economic crisis beyond their control. But if you can hold out your funds and manage to pay your EMIs on time, you must do so.
Applying for these schemes can be time taking and requires proper documentation. Read through the loan restructuring guidelines by your lender thoroughly to avoid unnecessary complications in your application process.
If you have multiple loans, this restructuring scheme can help you manage your funds better till you recover from the effects of COVID-19. It will also reduce your financial burdens for a short while to help you concentrate on getting your career or business back on track.
If you wish to know more about loan restructuring 2022, you can visit your lender’s website or call a representative.
FAQs
Loan restructuring 2.0 can help if you struggle with repayments due to unexpected problems. However, it can affect your credit score and future borrowing, so it is important to understand the loan restructuring meaning before deciding.
A loan restructuring 2.0 programme is an agreement between you and the lender to change your loan terms. It often includes reducing EMIs, extending tenure, or adjusting rates to avoid default and manage repayments better.
In most cases, loans are restructured only once. If you are wondering "can I restructure my personal loan again," it usually depends on RBI guidelines and your lender’s specific restructuring policies.
The risks linked to loan restructuring 2.0 include a drop in your credit score, a longer repayment period, and paying more interest. It is important to know the loan restructuring meaning and weigh these risks carefully before applying.
If you opt for the new loan restructuring plan, your current loan tenure may be extended. The new timeline depends on the terms offered by the bank and the options you choose during restructuring.
09 May 2025
6 mins read
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