What is restructuring of loans?

The Reserve Bank of India recently recommended a debtors loan modification scheme. My father also restructured our house loan. This is a one-time loan modification to reduce the pressure of repayment for debtors who are experiencing financial hardship as a result of the pandemic. Following a six-month prohibition that ended in August, the RBI has now permitted loan modification. Personal loans were included in this restructuring facility, and it was also declared that regular loan accounts (not in default for more than 30 days on March 1, 2020) would be included. Let me tell you what is restructuring of loans

What does restructuring a loan means?

The word "loan restructuring" refers to the process of changing the terms and circumstances of a loan. When you are in financial hardship, you have the option of revisiting, negotiating, and revising the loan terms to lessen the risk of default. If you extend the loan term with or without changing the interest rate, it might start the debt restructuring process. This technique provides significant relief to you by reducing the EMI load by spreading the due principal sum over a longer payback period.

RBI's loan restructuring scheme features:

1) A temporary loan repayment break, rearranging loan repayments, or decreasing interest rates are all options for debt restructuring.

2) Only available to borrowers who have been harmed financially by the Covid-19 epidemic.

The deadline for loan restructuring is December 31, 2020.

3) Loan restructuring is available from all public, private, foreign, cooperative, rural, small finance, and local area banks.

4) Non-Banking Financial Companies (NBFCs) and All-India Financial Institutions (AIFIs) can also provide it.

5) If you have made on-time payments in the past and are not more than 30 days past due as of March 1, 2020, are eligible.

Working of loan restructuring:

When a company is approaching bankruptcy, some corporations try to restructure their debt. Asking lenders to agree to lower interest rates on loans, prolong the dates when the company's payments are due to be paid, or both is typical of debt restructuring. These actions increase the company's prospects of repaying its debts and remaining in operation. Creditors realise that if the company is driven into bankruptcy or liquidation, they will receive considerably less.

I hope this clears your concerns about

what is restructuring of loans.