Your Bank May Recast or Defer EMIs for Personal Loan/ Home Loan Before Aug 31
RBI Governor Shaktikanta Das has said that banks are allowed to recast or defer EMIs of various retail loans on the basis of internal assessment. They do not need to wait for expiry of ongoing Moratorium or the recommendations of KV Kamath panel to direct new guidelines for repayment relief to their customers.
Earlier on Aug 6, RBI had guided banks to invoke the resolution plan for restructuring of stressed retail loan accounts till December 31, 2020 and implement the new norms within 90 days, max till March 30 2021.
Now in an interview to TV Channel CNBC Awaaz, RBI Governor said that Kamath Committee will share framework for recast of Business Loans and not the Personal Loans.
As for Personal loans banks are free to decide on extension of moratorium for 3, 6 or 12 months or to restructure loans for 2 years.
The contours of loan restructuring for Business Loans by Kamath committee will be disclosed on September 6. While banks and NBFCs can share the details of one-time restructuring before 31 Aug, added Governor.
Broadly banks will define products eligible for further repayment ease under COVID relief policy, eligibility criteria for same and how to avail of the benefit.
As per Times of India report, several banks have already started the process. Union Bank of India chairman Rajkiran Rai said: We have already got our board approval for restructuring personal loans. For MSME and retail loans, we do not need any guidelines as there is already a scheme in place.
Further he added that by next week UCO Bank will communicate the standard operating procedures by next week.
Hindustan Times in a news report quoted a banker that banks are mulling over a six month moratorium for those who have lost Jobs due to COVID19 while three month deferment for those who are facing pay cuts.
Particularly Home Loan Customers would want to get a more significant relief on their EMIs.
The eligibility for restructuring of Personal Loans, Home Loans and Credit Card Outstanding will be primarily will be decided on the basis of two factors:
1. The impact of COVID 19 on your monthly income.
2. The status of your account prior March 2020. Only standard accounts will be eligible to get such relief.
The lenders need to ensure only that only those borrowers who are impacted by financial disruptions caused by COVID 19 make use of these provisions.
The EMIs of most of the borrowers who opted for 6 months of Moratorium, must have hiked by at least 9 months. Thus only small loans will be suitable for up to 2 year of restructuring.
For longer term loans such as Home Loan or more than 2 year Personal Loans, further Moratorium or Balance Transfer could be an alternative. Another suitable alternative could be recasting part of loan, particularly the accumulated EMI & interest into a separate 2 year account. This way only a small EMI burden will be added to your previous monthly instalment.