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 Covid19 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 onetime restricting 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 the following:
- Auto and
- Education advances, and
- Rolling out the scheme
The RBI drafted facility enables lender to implement a resolution plan in respect of eligible lenders to implement a resolution plan in respect of eligible corporate exposures (without a change in ownership) and personal loans while classifying such exposures as standard assets (not NPAs).
Here there are certain eligibility criteria for the borrowers. SBI offers an OTP model online facility for customers to check eligibility. 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 loan tenure (upto 2 years), all of which implies additional outgo for borrowers over the loan tenure. While banks have opened the rejig window, customer response is still awaited.
- 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, Customer may react cautiously to the new resolution framework.
- An executive director with a public sector bank said: “The real adverse impact of Covid19 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.”
- A borrower will be considered pandemic-hit if his/her income in August was less than in February; if there was a job loss or pay cut; or, closure of business during the lockdown
- The loan account should be a ‘standard’ one as on the date of application for relief and also not in default for more than 30 days as on March 1
- There is no automatic approval; banks will grant it on a case-by-case basis.