The COVID pandemic has affected the lives of people in more ways than one. As part of the relief measures for borrowers, RBI announced a loan restructuring scheme on August 6, 2020. The primary objective of the central bank is to ease the financial stress due to the COVID -19 pandemic. Loan restructuring is offered to customers who are unable to repay loans due to COVID-19 crisis and depending on the level of stress as assessed by the lender or bank.

To cater to the guidelines set out by RBI, HDFC Bank has laid out the eligibility criteria for loan restructuring. The bank has also explained in detail about the scheme and various aspects surrounding its functioning. In this article, we will explain the various features of loan restructuring as offered by HDFC and how borrowers can benefit from it.

Why opt for loan restructuring?

Early this year and immediately after the advent of COVID pandemic, the Reserve Bank of India (RBI) granted a 3-month moratorium on EMIs of loans. It later extended the moratorium by additional three months up to August 31. Since the moratorium period is over, banks began offering loan restructuring options to borrowers to ease their financial burden in these difficult times. The RBI has allowed banks across the country to lay out their terms and conditions for loan restructuring.

RBI has circulated a framework for banks & lending institutions to easily implement resolution plans and address the economic downturn caused by the Covid-19 pandemic. The situation has led to substantial financial stress for borrowers. Based on this framework and various regulatory guidelines, banks have framed their policies for loan restructuring to help individuals and entities impacted by the Covid-19 pandemic.

Additional Reading: Everything You Need To Know About RBI Loan Restructuring: All Your Queries Answered

Eligibility for Loan Restructuring at HDFC Bank

Here are some of the eligibility criteria laid out by HDFC bank for loan restructuring:

a) Individuals and Entities classified under Standard category, who have not defaulted with the bank for more than 30 days as of March 1, 2020, and are marked as standard for all of the bank’s loans/facilities to date can opt for loan restructuring.

b) The customer must have been financially impacted due to Covid-19 pandemic. This could be either reduction or loss of income or halt in normal cash flows.

c) The claims of reduction in income and subsequent financial impact on an individual is thoroughly reviewed by the bank after all relevant documents/information is provided. The documentary evidence has to show a decrease in cash flows resulting from the Covid-19 impact. Before granting loan restructuring, the bank will study the viability of the applicant’s capability to repay the restructured EMIs depending on documents provided. Other than viability calculations, the bank also assesses the customer’s repayment track record and the detailed responses provided by the customer at the time of loan moratorium application. 

How HDFC bank loan restructuring works?

Application - Applicants can go through the bank’s website and look for the application form which can then be submitted with relevant details and documents. Alternatively, applicants can also contact their relationship manager at their HDFC bank branch. 

Loan Tenure - The remaining tenure of the loan is extended by a maximum of 24 months to help ease the applicant’s financial stress of monthly EMI repayment.

Documents - The bank needs applicants to submit documents containing details of their current employment status or status of their business. For salaried applicants - salary slips along with bank statements are required by the bank. For self-employed applicants/ entities - GST returns, Bank statements, Udyam certificate, Income tax returns, etc. is required to be submitted. Applicants can visit the bank’s website to look through the loan restructuring application and access the link for further steps.

Benefits of HDFC Loan Restructuring

Here are some of the key benefits offered by HDFC bank loan restructuring:

  • The bank offers an additional loan tenure of 24 months as part of loan restructuring. Thus, the remaining tenure of a customer’s loan is extended by an additional 24 months. If an applicant has 3 years remaining on a personal loan, the loan tenure can be extended by 2 years.

  • Since the bank offers a tenure extension, the loan EMI amount automatically comes down and eases the customer’s financial burden. It allows customers to make loan repayments in a timely and hassle-free manner. It is important to remember that if a customer chooses an extended loan tenure, he or she may end up paying a substantially higher interest amount.

  • With HDFC Bank Loan Restructuring, an applicant’s credit score does not get impacted since a loan or credit is reported to the credit agencies as being ‘Restructured’. This is applied to all the loans taken by the customer from HDFC Bank. It is also applicable even if a customer has opted for a Restructuring Scheme on a single loan.

  • Other than loans, one can also restructure his or her credit card loans and any outstanding balance. The entire credit card balance along with the loan can be restructured and combined into a separate loan.

  • For customers who have a Jumbo loan on their card apart from the outstanding balance, it is not necessary to restructure the same. They can choose to either clear the outstanding balance on the card or clear the Jumbo Loan depending on their comfort.

  • HDFC bank offers a minimum loan amount of Rs. 25,000 that can be restructured. Loan amounts lower than this cannot be restructured. The criteria set by the bank is that the outstanding balance on a card should be minimum Rs. 25,000.

The Bottom Line

As discussed in the article, HDFC Bank Loan Restructuring is designed to help borrowers who are facing issues in repaying their loan and require an additional loan tenure. The bank offered a 6-month moratorium period at the start of the pandemic; so, this is an additional benefit of an extended period. Other than loans, customers can also avail the restructuring benefits on credit cards.