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Explained | Did RBI governor announce a new loan moratorium and other questions answered –

Shaktikanta Das

Announcing a string of relief measures as concerns mount over the economic impact of the second coronavirus wave, the Reserve Bank of India (RBI) governor Shaktikanta Das said on May 5 the borrowers who opted for loan restructuring in 2020 can be given two years to pay back.

He also allowed the restructuring of loans for individual and small businesses and MSME borrowers who didn’t avail the facility in the previous round.

What does the RBI’s decision to allow borrowers more time to repay loans mean? Is it another moratorium? Here are some answers:

Has the RBI announced a new loan moratorium scheme?

No. The RBI has not announced a new blanket loan moratorium scheme like it did in 2020.

What did the governor say?

What Das said was that banks can extend the loan moratorium for up to two years for both individual and small-business borrowers who had opted to restructure loans in the earlier round. This was part of the earlier resolution plan. Now, the RBI has allowed bankers to invoke this provision.

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What about other borrowers?

The RBI has announced a second round of loan restructuring—resolution framework 2.0—for individual and small businesses and MSME (micro, smal and medium enterprises) borrowers who didn’t avail the facility in 2020.

Who are eligible?

Individuals and small businesses and MSMEs having a total exposure of up to Rs 25 crore which didn’t avail restructuring earlier and were classified as “standard” as on March 31, 2021 will be eligible for resolution framework 2.0.

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Also read: RBI Governor Shaktikanta Das launches second round of loan restructuring, other relief measures to counter Covid second wave

What is the deadline for availing this scheme?

Banks can invoke restructuring under the proposed framework till September 30, 2021. This needs to be implemented within 90 days after invocation.

How are the new guidelines different from an all-out moratorium?

In 2020, the central bank allowed all lending institutions to let borrowers put off repayment of term loans for six months (March to August). The moratorium applied to all categories of borrowers. However, this time, there is no blanket relief. The RBI has extended a two-year moratorium to only those borrowers who restructured their loan in the previous round.

So, can borrowers get a moratorium under the new plan?

There is a possibility that banks may allow a moratorium under this scheme also but it would only be known once guidelines of framework 2.0 are shared. While restructuring, banks typically relax repayment terms, reduce the interest rate, extend the repayment period or allow a moratorium. In fact, with the option for a fresh round of loan recast, borrowers do not need a specific moratorium facility.