Amid Covid-19 stress, banks start restructuring loans of small businesses

In a move that would provide relief to small businessmen across the country, several banks have started the process of restructuring loans up to Rs 25 crore. The restructuring is being implemented in line with announcements made by RBI earlier this month to provide relief from Covid-19. Small businesses have been amongst those hardest hit by the second wave of coronavirus.

In view of the severe distress caused by the pandemic, the Reserve Bank had announced Resolution Framework 2.0 which allowed individuals and small businessmen to get their loans under Rs25 crore restructured, provided they had not opted for the earlier scheme.

For those who did avail the earlier scheme, the central bank has allowed their lending institutions to increase the period of moratorium. However, only borrowers who were classified as ‘standard’ till March 31 this year can avail the benefits of the scheme.

After RBI’s announcement, several banks started the process of restructuring upon getting permission for the same from their board members. Now many banks like the Bank of India are sending messages to customers eligible for the scheme to take benefit of the same.

The last date to get the restructuring of the loan invoked is 30 September 2021 following which it must get implemented within 90 days.

The framework announced by the RBI is the second restructuring scheme introduced by the central bank after the one launched in August 2020.

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