The way ahead for the borrowers after moratorium period ends

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The nationwide lockdown due to the COVID-19 pandemic has hurt every citizen of this country in some way or the other. The working population has been one such category that has been adversely hit by this pandemic due to job losses, running out of savings, pay cuts, etc. This led to problems for the Banks as a lot of debtors were not able to service their EMIs. That is when RBI stepped in.

The Reserve Bank of India (RBI) vide a circular dated 27th March 2020 permitted the lenders to allow a moratorium for three months of EMI (Equated Monthly Installments), due between 1st March 2020 and 31st May 2020 for various categories of Loan. This was done to give relief to both the lenders and the borrowers as failure to pay would have led to them turning into NPAs for the banks and the borrowers, a blemish on their credit score for no fault of theirs. This was later on further extended by three more months till August 31st, 2020. The Moratorium granted by the RBI helped in deferring the due dates for EMI payments. This relief came with a rider though, that the borrowers will have to pay the interest for the period of moratorium. This facility was available to each of the borrowers of the Banks whether he/she has been affected by the Pandemic or not. To further address the cash crunch faced by the individuals, RBI allowed the banks to devise a scheme to restructure the loans of the borrowers in the first week of August. This was to kick in after the moratorium period comes to an end on 31st August 2020. The scheme would cover all kinds of personal loans whether secured or unsecured like consumer loans, education loans, home loans, etc. This would give the borrower a chance to restructure his loan and avail a further moratorium of two years.

There are certain eligibility criteria for availing the restructuring scheme. Firstly, the repaying capacity of the borrower should have been adversely affected by the COVID 19 Pandemic. Secondly, this facility is applicable only on those whose loan was not overdue by more than 30 days as on 1st March 2020. If it was already an NPA as on 1st March 2020, the borrower will not be eligible for the scheme. You can avail of this facility even if your EMIs are not overdue provided that you establish that your repaying capacity has been adversely affected due to the pandemic.

Reserve Bank of India has tried its best to manage this mess and this scheme is a breather for all the branches of the Financial ecosystem. It can be availed by producing the necessary documents in front of the banks like your termination letter, pay cut letter, or your bank statement which establishes the said connection.

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