Borrowers will benefit from a new loan restructuring strategy that provides greater certainty.

Lenders and credit card firms can pick which kind of assistance they wish to provide to borrowers under the programme. The Reserve Bank of India’s (RBI) new debt restructuring policy encourages lenders and card issuers to be more open and establishes timeframes within which they must respond.RBI Resolution Framework

The RBI established Resolution Framework 2.0 during its most recent monetary policy meeting, allowing lenders to restructure loans for individuals and small enterprises.

Like Resolution Framework 1.0, the new standards provide lenders with the restructures authority to approve or reject restructuring proposals. Borrowers continue to be powerless in the process. According to each institution’s board-approved policy, the decision will be made, as said by Adhil Shetty, CEO, BankBazaar.com.

Lenders and credit card firms can also pick the kind of assistance they wish to provide to borrowers under the programme. He stated that a lender could lower the equated monthly instalments (EMIs), grant a moratorium, convert interest into another credit facility, or combine two or more of these options.

Lenders must modify the existing loan or credit card in such a way that the borrowers’ tenure extension is reasonably two years.

However, unlike the last time, the RBI’s circular included recommendations for lenders to guarantee borrowers have greater clarity. Within four weeks after receiving the circular, the regulator has requested lenders to develop board-approved policies (by 2 June).

Previously, for up to two to three months after the RBI issued the circular on August 6, lenders did not have a restrucMany borrowers went to financial institution branches to inquire about debt modification. However, they were told that the main office had no directives for the branches. Call centres, too, were ineffective.

The lenders must also mention “the method for resolving the grievances of borrowers who desire resolution under the window and are undergoing rescheduling” in their board-approved policy.

Borrowers didn’t understand why lenders rejected their petitions during the previous restructuring operation. They couldn’t approach anybody to argue their case if they were denied. If lenders make the board-approved policy public on their websites, borrowers will be able to determine whether or not they meet the lenders’ requirements. They can also use the lenders’ grievance redress system to convey their case.

The RBI has also instructed banks to notify borrowers of their restructuring decision within 30 days of filing an application. Previously, some lenders did not notice the application and took their time to communicate their judgement. In some circumstances, lenders did not even notify the borrower of the restructuring application’s rejection. Borrowers waited until the deadline for a decision (31 December).

The regulator has also urged lenders to make their own decisions. They should not consider whether or whether the borrower has been offered to restructure by other lenders.

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