Debtors await clarity as moratorium ends

Mumbai-based Tarun Shetty, 35, for instance, has three personal loans from HDFC Bank, Kotak Mahindra Bank and Clix Capital. Laid off from his job, he opted for a moratorium on loan repayments until 31 August. Now, he has approached his lenders for a restructuring of his loans only to be told they haven’t yet formulated a policy on it.

“One of the lenders even refused to give me a moratorium, while the other two did. The same lender tried to debit my bank account 19 times between June and August, and my balance was - ₹9,797 as my bank levied a penalty for bouncing of ECS (electronic clearing system). The same may happen if lenders delay restructuring of loans," said Shetty.

Sheeba Murli, 45, has written to the NBFC she took her home loan from, seeking a loan recast, but is yet to hear back. Murli, who works in a hotel as an executive assistant, has taken a 75% salary cut. Her husband, who is with a manufacturing company, took a 50% hit.

Very few banks and card issuers have come up with loan restructuring offers for retail customers. Among lenders and card issuers Mint spoke to, only Federal Bank and SBI Cards and Payment Services Ltd have started offering restructuring plans. Most lenders and issuers are only telling customers how much their new equated monthly instalments will be after the moratorium.

Some large private and public sector banks are yet to issue any board-approved policies for restructuring of loans. However, according to media reports, public sector banks are planning to offer a uniform framework for recasting retail loans.

“This is a huge restructuring exercise that the banking sector has not experienced before. Those who are facing cash flow problems due to job losses or pay cuts can approach the bank with relieving letter or bank statement and get the loan recast," said Babu K.A., senior vice-president and head–loan collection and recovery, Federal Bank.

“Retail borrowers can approach their lenders or card issuers until 31 December asking for relief. The sooner they do it, the better the chances that they won’t face penalties and bounce charges," he added.

SBI Card has sent out a communication to those who availed the moratorium to convert their outstanding amount into EMIs. It has offered customers the option to choose from tenures of 6, 12, 18 and 24 months.

According to rating agency India Ratings and Research, around 7.7% of the total bank credit at end-March from corporate and non-corporate (retail, farm, micro, small and medium enterprises) segments could get restructured, based on the Reserve Bank of India’s resolution framework.

This translates to ₹8.4 trillion worth of loans. It could be higher if the restructuring in non-corporate segments exceeds 1.9% of the total bank credit.