What is meant by restructuring of loans?

Loan Restructuring fundamentally means the modification of the loan terms and conditions. When a borrower faces financial distress, he can opt to revisit, negotiate and revise the loan terms and reduce the chances of any payment default.

Is loan restructuring good or bad?

Restructuring means increased loan repayment burden as compared to the original term. It is better to avoid loan restructuring if the repayment tenure goes beyond the date of retirement. You may face liquidity issues or difficulty in meeting the new repayment obligations.

Why do we restructure loans?

The debt restructuring process typically involves getting lenders to agree to reduce the interest rates on loans, extend the dates when the company’s liabilities are due to be paid, or both. These steps improve the company’s chances of paying back its obligations and staying in business.

Are restructured loans considered non performing?

Restructured loans do not necessarily mean NPLs. A bank may decide to restructure a performing exposure. At the same time, when restructuring a performing exposure, the bank needs to ensure that, even when the restructuring resulted in a new exposure, it does not wind up falling into any of nonperforming criteria.

Can personal loan restructured?

Yes, Personal Loans can be restructured. However, the current Covid situation has put immense pressure on borrowers in repaying personal loans. Restructuring your personal loan can be a prudent way to avoid loan defaults. You can approach your bank and submit an application for loan restructuring.

Who is eligible for loan restructuring?

To be eligible for loan restructuring, the basic requirements are as follows: The applicant’s loan account must have no dues pending as on Mar 01, 2020 or dues overdue for less than 30 days (89 days for MSME customers). The applicant’s income should have been impacted as a result of the COVID-19 pandemic.

How do banks restructure debt?

Loan/debt restructuring in simple terms refers to changing existing loan contract terms for the borrower. This is to facilitate managing of loan principal (initial size of the loan) and interest obligation due to the lender, which is the bank or NBFC.

Why do banks offer restructured loans?

Loan restructuring is a process in which borrowers facing financial distress renegotiate and modify the terms of the loan with the lender to avoid default.

What is the difference between loan rescheduling and loan restructuring?

Rescheduling refers to the extending or lengthening of your loan tenure, resulting in a revision of your monthly instalment amount so that you pay a lesser sum each month. Meanwhile, Restructuring involves changing the type or structure of your existing loan to help you improve your current cashflow.

Does restructuring affect credit rating?

While the scheme is a relief for many borrowers who are having difficulties in paying off their debt, keep in mind that restructuring will have implications on your credit score. Loans that fall under restructuring will be reported in credit reports as ‘restructured’. This could affect your CIBIL score.

Can I restructure my mortgage loan?

The loan restructuring option can be availed only if you failed to repay your EMIs due to a loss of job or income necessitated by the Covid-19 pandemic. Loan restructuring may be subject to additional charges, and though it may lower your EMIs, you will have to pay more interest due to the increased tenure.

What is restructuring of bank loans?

Change in the repayment period which is usually extended

Variation in the repayable amount

Changes in the number of installments that were previously agreed upon

A change in the rate of interest previously charged

Provision for additional loans

What is loan restructuring?

The purpose of loan restructuring is to provide a long-term solution for borrowers, who due to unforeseen circumstances, no longer see the repayment of their loan as a feasible option. Through a loan restructure, the lender would grant the borrower a more manageable repayment plan in order to help the borrower keep their home. First Name*.

What is debt reconstruction?

Debt reconstruction – a way to get your finances in order. This is how we normally explain debt reconstruction – a way for people who are heavily indebted to get their finances in order.