“Borrowers i.e. individuals and small businesses and MSMEs having aggregate exposure of upto Rs 25 crore and who have not availed restructuring under any of the earlier restructuring frameworks (including under the Resolution Framework 1.0 dated August 6, 2020), and who were classified as ‘Standard’ as on March 31, 2021 shall be eligible to be considered under Resolution Framework 2.0,” RBI governor said.
Here is how the second moratorium will work for different borrowers and things they need to do to avail it.
Borrowers who did not avail earlier moratorium
Last year, the RBI announced a loan moratorium of up to 2 years for borrowers to tide over exigencies caused by the nationwide lockdown due to the pandemic. There are many individual borrowers who did not opt for this loan moratorium and are now facing difficulties in repaying their loans. Any default on repayment not only leads to higher cost in terms of interest and penalties but also impacts one’s credit history negatively which reduces future creditworthiness. Moratorium helps such borrowers in keeping their credit history intact even after skipping repayments and restructuring loans for the specified period.
As the time for applying for the previous moratorium ended in December 2020, these borrowers had no option to avail that moratorium. The new moratorium announced by the central bank will bring big relief to them as they can now avail the second moratorium..
Do keep in mind that to be eligible for the new moratorium, there should not be any default on loan repayment till March 31, 2021.
What if you already availed a moratorium
The earlier loan moratorium framework allowed borrowers to opt for a moratorium of 3 months in phase1 from March 1, 2020 to May 30, 2020. It was extended by 3 months to August 31, 2020. Later the central bank allowed the moratorium as part of restructuring where the loan moratorium could be extended up to a total period of 2 years with consultation with the lender.
If you opted for a moratorium in 2020, you will be eligible to get a new moratorium under which your remaining tenure can be extended up to 2 years.
“In respect of individual borrowers and small businesses who have availed restructuring of their loans under Resolution Framework 1.0, where the resolution plan permitted moratorium of less than two years, lending institutions are being permitted to use this window to modify such plans to the extent of increasing the period of moratorium and/or extending the residual tenor up to a total of 2 years. Other conditions will remain the same,” the RBI governor said.
The last day for applying for new moratorium
RBI has given borrowers time until September 30, 2021 to approach their lenders to request restructuring of their loans. Once you apply for the new moratorium, the lender will have to implement it within 90 days if you fulfill all the conditions.