Private lender HDFC Bank has released its guidelines for loan restructuring for individuals and entities affected due to the COVID-19 pandemic. The bank released the guidelines as per the framework issued by the Reserve Bank of India to provide resolution plans for customers impacted by the economic downturn caused by the pandemic.
HDFC Bank is the second bank after the State Bank of India to announce a loan restructuring scheme policy along with FAQs on its website to help its borrowers. Both banks have come up with an eligibility criteria for the loan restructuring. Here are a few questions answered for availing the HDFC loan restructuring scheme. For the full list of FAQs, you can visit the bank website.
Who Is Eligible?
As per the bank’s website,
a) Individuals and Entities that are classified as Standard, but not in default for more than 30 days with the bank as on March 1, 2020 and continue to remain as standard across all its loans/facilities till date are eligible for restructuring.
b) The customer has to be impacted financially by the COVID-19 pandemic in the form of reduction/ loss of income or cash flows.
c) The reduction of income and its financial impact on the customer will be reviewed by the bank basis the documents / information provided which shows the drop in cash flow due to COVID-19. The bank will assess the viability of the customer to pay the restructured EMIs basis the documents provided, before granting the restructuring. Apart from the viability calculations, the repayment track record of the customer, and the responses given by the customer while availing moratorium earlier will also be factored in the restructuring decision.
If you are eligible, you can visit the bank’s website to fill the relevant application form with required details. The bank will update about the link for application soon. You can also visit the bank and meet the relevant official to process the scheme.
What Will Be The Restructuring Option?
The remaining tenure of your loan can be extended by a further period of a maximum of 24 months to ease your monthly EMI repayment burden.
Fees To Be Levied
The bank may ask for processing fees if you choose to restructure your loan.
Will It Affect Your Credit Report?
As per regulatory guidelines, your loan/credit facility will be reported to the credit bureau as “Restructured”. Please note that as per regulatory guidelines, restructuring has to be reported at a borrower level to the credit bureaus and hence all the facilities / loans of the borrower with the bank will be classified and reported as “Restructured” even if the borrower has taken restructuring for only one loan.
What Will Happen To Your Credit Card EMIs And Balance?
The entire credit card balance including the loans within the credit limit will be restructured and converted into a separate loan account.
Loans That Are Not Eligible For Restructuring
Loans to individuals/entities for agricultural purposes and classified as agricultural loans by the bank
agricultural credit societies
financial service providers
Central, State and local government bodies
HDFC Bank employees
Exposures to housing finance companies which have already been rescheduled
BB Take On Restructuring
While it is a welcome move by the banks to help financially stressed customers, it would be wise for borrowers to be cautious before opting for a loan restructuring option. It will not only increase the loan burden over the long run but will also extend your loan tenure. If there is a cash crunch, you should first explore all your repayment options and go for loan restructuring only when you have exhausted all your options. It is also important to note that you will be required to furnish documents such as salary slips or account statements to establish loss or reduction of income. Self-employed borrowers would need to furnish a declaration indicating closure of or reduction in business activity during the lockdown.