Banks ready with one-time rejig plan for retail loans

There’s relief in sight for pandemic-hit retail borrowers struggling to make EMI payments. Banks have started offering relief packages to borrowers under the RBI’s Resolution Framework for Covid-19-related Stress.

As the six-month moratorium offered to all borrowers came to an end on August 31, the RBI allowed banks to open a one-time restructuring window for banks to offer further relief to borrowers who are still cash-crunched and unable to resume EMI payments. The one-time restructuring of loans include personal, housing, auto and education advances, and credit card dues. Banks are now rolling out the scheme.

“We have framed guidelines on the modalities and customers can apply for relief before December 24, 2020,” a senior SBI official told BusinessLine.

The RBI-drafted facility enables lenders to implement a resolution plan in respect of eligible corporate exposures (without change in ownership) and personal loans, while classifying such exposures as standard assets (not NPAs). There are certain eligibility criteria (see chart) for borrowers.

SBI is offering an OTP-model online facility for customers to check eligibility.

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All you need to know about SBI’s restructuring option

Additional outgo

While there is uncertainty over the interest charged on loans during the moratorium period (a Supreme Court decision is awaited), there is certainly a cost factor for those who want to opt for the restructuring option, say bankers. Restructuring normally involves rescheduling of EMIs and grant of additional moratorium or extension of the loan tenure (up to two years) — all of which implies additional outgo for borrowers over the loan tenure.

While banks have opened the rejig window, customer response is still to happen. A handful of customers with whom BusinessLine interacted did not even seem to be aware of the restructuring option.

“There is no general intimation for an ordinary customer. I only just became aware of such an option,” said R Ranga Rao, an SBI customer.

According to K Bhaskar Rao, CGM, Union Bank of India, Hyderabad, as most retail segment advances, such as home loans, are taken by the employed class, customers may react cautiously to the new resolution framework, wary of additional costs.

An executive director with a public sector bank said: “The real adverse impact of Covid-19 is now beginning to be seen more clearly. In view of the uncertainty during the pandemic, I expect middle-class borrowers to go for the relief package, going forward.”