One time restructuring of an MSME loan in India refers to the process of modifying the terms and conditions of an existing loan to provide relief to borrowers who are facing financial difficulties. In the process of loan restructuring, adjustments are made to the loan's conditions, which might encompass lengthening the loan duration, lowering the interest rate, or allowing a grace period during which the borrower can temporarily halt payments or decrease loan repayments. 

What is The Reason for Restructuring of MSME Loans?

Restructuring is done by the lending institution, such as a bank

  • To balance various factors such as economic downturns, industry specific challenges, or unexpected events that affect the borrower’s ability to repay the loan. 
  • To provide financial assistance to businesses in distress, enabling them to regain stability and continue their operations

How to Go About The Restructuring Process?

  • Evaluate your financial situation:  Assess your financial situation to understand whether you really need the restructuring 
  • Contact your lender: Reach out to the lender to inform them about your financial challenges. Then, ask them about their loan restructuring policies, guidelines, and documents. 
  • Understand the restructuring options: Get to have clarity on the different finance restructuring options available for the long term. Loan period extension, decreased interest rate, grace period availability. This may help in future repayments.
  • Prepare a restructuring proposal : This includes a detailed plan of how the financial challenges are planned and how to overcome them. 
  • Submit application : The application for loan restructuring with the restructuring proposal and financial plan is submitted to the lending institution.
  • Evaluation and decision making : Lender reviews the application, financial documents, and restructuring proposal. They assess the financial obligation with an evaluation committee for loan restructuring. This takes time.
  • Negotiation and Finalization : Once application is accepted, the lending institution communicates their terms and conditions for the loan restructuring. Seek external advice and finalize the agreement terms. 
  • Compliance with loan restructuring terms : The loan restructuring is approved by the lending institution. It's important to comply with their terms and conditions for repayments and financial obligations.