Loan Restructuring Scheme
To address the economic fallout and the resultant financial stress caused by long periods of lockdowns due to COVID 19 pandemic, RBI has issued a circular providing the banks and lending institutions a framework under which loans given to individuals for personal consumption and entities for their business needs can be restructured. This will be applicable only for individuals and entities that have been impacted due to the COVID-19 pandemic.
FREQUENTLY ASKED QUESTIONS
Are all customers eligible for restructuring?
Customers meeting below mentioned criteria will be eligible for restructuring
a) Individuals and Entities (Personal segment)- Should have been classified as Standard and not in default for more than 30 days with the bank as on March 1, 2020. The customer should continue to remain standard across all its loans/facilities as of the date of restructuring.
b) Entities (MSME segment) – Should have been classified as Standard as on March 1, 2020 and should also fulfil the following criteria
i. The aggregate exposure, including non-fund-based facilities, of banks and NBFCs to the borrower does not exceed INR 25 Crore as on March 1, 2020
ii. The borrowing entity is GST-registered on the date of implementation of the restructuring. However, this condition will not apply to MSMEs that are exempt from GST-registration. This shall be determined based on exemption limit obtaining as on March 1, 2020
c) Others not falling in the above definition of Personal segment or MSME will also qualify for restructuring provided below mentioned conditions are fulfilled
i. Should have been classified as Standard as on March 1, 2020 but not in default for more than 30 days with any lending institution as on March 1,2020
ii. In case if there are multiple lending institutions with exposure to the borrower, the resolution framework shall be treated as invoked if lending institution representing 75 percent by value of total outstanding credit facilities (fund based as well as non-fund based) and not less than 60 percent of lending institution by number agree to invoke the same.
What loans will qualify under the definition of Personal segment?
In terms of RBI circular DBR.No.BP.BC.99/08.13.100/2017-18 dated January 4, 2018
Personal loans refer to loans given to individuals and consist of (a) consumer credit, (b) education loan, (c) loans given for creation/ enhancement of immovable assets (e.g., housing, etc.), and (d) loans given for investment in financial assets (shares, debentures, etc.).
Consumer Credit as defined above refers to the loans given to individuals, which consists of (a) loans for consumer durables, (b) credit card receivables, (c) auto loans (other than loans for commercial use), (d) personal loans secured by gold, gold jewellery, immovable property, fixed deposits (including FCNR(B)), shares and bonds, etc., (other than for business / commercial purposes), (e) personal loans to professionals (excluding loans for business purposes), and (f) loans given for other consumptions purposes (e.g., social ceremonies, etc.). However, it excludes (a) education loans, (b) loans given for creation/ enhancement of immovable assets (e.g., housing, etc.), (c) loans given for investment in financial assets (shares, debentures, etc.), and (d) consumption loans given to farmers under KCC.
In case of the following type of loans, will it be eligible for restructuring under personal segment?
a. Loan Against Property” loans which are availed for business purpose but are secured by immovable assets
b. Loans granted to individuals where the property is in name of individual and a related company/non individual entity has been taken as co-borrower on the loan structure to supplement the income for repayment of loan.
If not, where would such set of customers would be covered for Covid-19 related stress?
The above exposures do not qualify as personal loans. In such cases, the resolution of eligible borrowers may be undertaken under Part B of the Annex to the Resolution Framework advised by RBI or under the MSME guidelines for restructuring of advances, subject to the borrower being an MSME.
Am I eligible for restructuring if I have taken loan after 1st March 2020 and affected by pandemic?
No, only those loans which were availed before 1st March and affected by pandemic will be eligible for restructuring.
How do I avail the restructuring benefit on my loan?
For Retail Customers – Please visit the bank’s website (https://capitalfirst.com/customer-loan-restructuring) and fill up the application form. You would also have to provide the associated documents and declarations as mentioned in the application form.
Which are the loans covered under this framework?
The following loans are covered under the framework
- Housing and Mortgage Loans
- Vehicle Loans – (Commerical Vehicles, Two-wheeler and Used car)
- Personal Loans
- Business Loans
What all documents do I need to submit to avail the benefit?
The bank may require you to submit the following documents pertaining to your employment and business to determine the financial stress
a. Salaried Customers – Pre- COVID as well as latest salary slip and bank statements
b. Self-employed Customers - Bank statement, GST returns, Income tax returns etc.
These requirements may vary depending on the kind of loan availed and loan outstanding. You may visit the bank’s website for further details.
What will be the eligibility criteria for restructuring?
a. The customer who wish to apply for restructuring must have been impacted financially by the lockdowns due to COVID-19 pandemic in the form of reduction / loss of income which can be substantiated through
i. Reduction / suspension in salary seen now as compared to Feb 20
ii. Job loss.
iii. Closure of Business /Reduced business volumes
b. The application for restructuring will be reviewed by the bank based on documents / information provided at the time of restructuring, detailed due diligence on viability of customer cash flows, responses provided by customer and repayment behavior of the customer during moratorium period of March-Aug 20.
What are the restructuring options that are available to me?
Restructuring options will be available on login portal. Exact tenor and EMI will be decided based on assessment by the bank.
Whether there will be any change in EMI?
Yes, the tenure and EMI will be recalculated and advised to you.
Will there be any processing fees or charges if I restructure my loan?
The bank will levy a fee of 0.35% for loans above INR 10Lakhs for restructuring a loan.
Will there be any change in rate of interest charged to my loan?
The bank will charge additional interest of 0.50% for loans above INR 10Lakhs in the form of risk premium over and above the current rate of interest for the remaining tenure of the loan.
I hold multiple loans/credit facilities with the bank. Do I have to apply separately for each of these loans?
Yes, customer have to apply separately for each loan.
Will opting for the restructuring package have an impact on my credit bureau report?
Yes. This would have an impact on your credit standing. As per the regulatory guidelines advised by RBI, your loan/credit facility will be reported to the credit bureau as “Restructured”.
I have not availed moratorium. Can I apply for restructuring?
All customers of the bank are eligible for restructuring irrespective of the moratorium applied status subject to the borrower meeting the bank’s approved restructuring policy and the regulatory guidelines for restructuring.
Up to what date can I apply for relief under the framework?
The last date to apply for relief under the framework is 24.12.2020 for personal segment, 20.03.2021 for MSME segment and for other segment by 30.11.2020
My loan was taken along with a co-borrower/s. Do I require their consent for restructuring?
All borrowers/co-borrowers of the original loan need to agree and sign on any changes in the loan structure including the restructuring agreement.
Can I apply for additional loan under this framework?
No
My account is Standard as on 01.03.20 but slipped to NPA subsequently will I be eligible for restructuring under MSME guidelines?
Yes
Will borrowers against whom the Bank has initiated legal recourse for recovery of dues (including under the SARFAESI Act) be eligible for restructuring?
No
My account was classified as NPA on 01.03.20 but subsequently upgraded as I paid off overdue amount. Am I eligible for restructuring under MSME guidelines?
No
Are JLG loans eligible for resolution plan under the Resolution Framework?
a) JLG Loan for Agri Allied activities like dairy, fishery, animal husbandry, poultry, bee-keeping and sericulture, then it will be allowed to be restructured under the resolution framework.
b) JLG Loans for Farm Credit like KCC, Pre and Post Harvest activities, Loan against Hypothecation of Crop Produce: Not eligible.
c) JLG Loans for other than Point a & b above: Will be allowed to be restructured under the resolution framework depending on the end use of the loan.
The definition of MSME had been changed by the Government vide Gazette notification dated June 26, 2020. As the reference date for the Resolution Framework is March 1, 2020, which definition of MSMEs will be applicable for the purpose of eligibility or otherwise for resolution under the Resolution Plan?
For the purpose of eligibility for resolution under the Resolution Framework, the definition of MSME that would be applicable is the one that existed as on March 1, 2020.
If a loan account was more than 30 DPD on March 1, 2020, but subsequently got regularized through receipt of overdue, will such accounts be eligible for resolution plan under this framework?
Such accounts are ineligible for resolution under this Resolution Framework as it is applicable only for eligible borrowers which were classified as standard, but not in default for more than 30 days as on March 1, 2020.
Is there any minimum cut off with respect to aggregate outstanding exposure with banking system for mandatorily signing ICA under the Resolution Framework? Also, whether the ICA norms are applicable to loans availed by individuals for business purpose from two or more banks?
If there are multiple lending institutions with exposure to a borrower whose resolution is undertaken in terms of Part B of the Annex to the Resolution Framework, all lending institutions having exposure to such borrower are required to enter ICA.
What type of borrower’s / credit facilities) are not eligible for restructuring (Personal & Other than Personal Category)?
The following type of borrower(s) / credit facility(ies) are not eligible for restructuring under RBI’s Resolution Framework:
a. Farm credit as listed in Paragraph 6.1 of Master Direction FIDD.CO.Plan.1/04.09.01/2016-17 dated July 7, 2016 (as updated) or other relevant instructions as applicable to specific category of lending institutions.
b. Loans to Primary Agricultural Credit Societies (PACS), Farmers' Service Societies (FSS) and Large sized Adivasi Multi-Purpose Societies (LAMPS) for on-lending to agriculture.
c. Exposures of lending institutions to financial service providers. Financial service providers shall have the same meaning as in sub-section (17) of Section 3 of the Insolvency and Bankruptcy Act, 2016.
d. Exposures of lending institutions to Central and State Governments; Local Government bodies (eg. Municipal Corporations); and, body corporates established by an Act of Parliament or State Legislature.
e. Exposures of housing finance companies where the account has been rescheduled in terms of para 2(1)(zc)(ii) of the Master Circular - The Housing Finance Companies (NHB) Directions, 2010 after March 1, 2020, unless a resolution plan under this framework has been invoked by other lending institutions. However, from the date of this circular, any resolution necessitated on account of the economic fallout of Covid-19 pandemic, shall be undertaken only under this framework.
f. MSME borrowers whose aggregate exposure to lending institutions collectively, is INR 25 crore or less as on March 1, 2020.
Note: Wholesale and Business Banking customers are requested to reach out to their respective Relationship Managers for details.