RBI Governor announces loans restructuring facility for small borrowers

RBI Governor Shaktikanta Das today announced a major update for small borrowers. He said that borrowers who are struggling to pay loans during the pandemic can avail restructuring options. The restructuring option will be open to borrowers who hadn’t availed in 2020. Borrowers can now opt for it if the amount is less than Rs 25 crore. For those who availed it, lenders can modify their loans. They can extend their tenure up to a total of two years.

The framework that Mr Das announced, states borrowers can ask for restructuring until September 30, 2021. Further, banks have to implement it within 90 days of invocation. Actual restructuring terms will depend on the lenders. This announcement comes in at a time when the second wave is negatively impacting economic activities.

“Resurgence of Covid-19 pandemic in India in recent weeks and the associated containment measures adopted at local and regional levels have created new uncertainties. They have impacted the nascent economic revival that was taking shape. In this environment, the most vulnerable category of borrowers are individual borrowers, small businesses and MSMEs,” RBI Governor Shaktikanta Das said in a speech.

What do industry leaders think of the restructuring option from RBI?

Madhusudan Ekambaram is the Co-Founder & CEO, KreditBee and Co-Founder, FACE (Fintech Association for Consumer Empowerment. In an emailed comment, he said, “The RBI’s announcement of re-opening one-time restructuring for individuals and MSMEs till September 30, comes as a great relief. This welcoming move was the need of the hour since individuals and businesses have been gravely affected by the pandemic’s second wave and lockdown-like situations, resulting in acute economic stress on states. The RBI’s decision will provide the necessary headroom to the financial institutions to effectively re-evaluate their working capital. It will work towards positively impacting the general sentiment in the economy,” he added.

Mirroring the thought, Ramesh Iyer, MD & VC, Mahindra Finance said, “The RBI’s announcement on the relief measures for small businesses, individuals, and micro, small and medium enterprises couldn’t have been more timely as the country is fighting a war against Covid -19 pandemic. It’s an important announcement looking at the present economic landscape. This will provide an impetus for businesses to recover from Covid -19 pandemic blues. The RBI’s decision to rationalise certain components of the extant KYC norm this will support financial institution to operate efficiently. With these measures in place, I am confident that as a nation we will emerge much stronger from this pandemic crisis.”