How individual borrowers can benefit from the second loan moratorium offered by the RBI due to coronavirus?

The second wave of Covid-19 pandemic has again taken the country by storm making most state governments go for lockdown causing hardship to the people and the economy. Due to businesses being shut, it has again caused hardships to borrowers who have regular EMI payments.

Taking such hardships faced, the RBI has asked lenders to grant loan restructuring including a moratorium for up to two years, for individuals and small and medium enterprises that were not able to restructure their loans during 2020 and have been classified under standard accounts as of March 31, 2021.

Who can opt for the second RBI Loan Moratorium?

Individuals and small and medium enterprises who had not opted for RBI’s first loan moratorium introduced during 2020, can avail the benefits from this second RBI loan moratorium. Even those who had availed the benefit in the first RBI scheme can get their moratorium period extended. The accounts have to be classified as standard accounts for eligible borrowers as of March 31, 2021. There should be no default on loan payments till March 31, 2021.

How will the second RBI Loan Moratorium benefit individual borrowers?

Due to the second wave of Covid-19 pandemic and subsequent lockdown, individual borrowers and small and medium business owners are facing severe financial constraints to repay their existing EMIs on a regular basis. Any default on loan payments leads to heavy penalties and a reduction in their credit score and creditworthiness.

To help such borrowers tide over their financial concerns, the RBI has introduced the second restructuring which is eligible to borrowers provided they have not defaulted on loan payment till March 31, 2021.

This implies that borrowers can defer their EMI payments for up to 2 years provided they have not already claimed the benefit under the first RBI loan moratorium. In case the borrower had availed the benefit under the first loan moratorium, then can still ask for an extension of the benefit up to a maximum period of 2 years.

This would help eligible borrowers to meet their immediate financial needs and halt payment of their ongoing EMIs for up to 2 years.