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Mumbai-based Tarun Shetty, 36, was laid off from a brokerage house at the beginning of the year. He regularly paid equated monthly instalments (EMI) for two loans with Kotak Mahindra Bank until the Reserve Bank of India (RBI) announced the moratorium. Later, on 3 November, he applied for restructuring to ease his loan burden at the bank’s website.

According to Shetty, he did not hear back from the lender despite multiple emails and phone calls. After Mint reached out to the bank on 22 December, Shetty got a call from an executive and was offered restructuring. “The bank didn’t give an acknowledgement for the restructuring application, and the customer care department confirmed that the lender doesn’t offer it," said Shetty.

As he doesn’t have a job yet, he has not been paying EMI after moratorium ended. The balance in his savings account is in the negative, at - 11,578, due to ECS (electronic clearing service) bounce charges.

“The customer that you are referring to has two loan accounts with our bank. He has already availed the moratorium facility for both accounts earlier this financial year. We have reached out to the customer with a restructured loan repayment plan, which is as per the permitted guidelines and the bank’s board-approved policy framework for restructuring of loans of eligible borrowers who have been impacted by the pandemic," said Rohit Rao, chief communication officer, Kotak Mahindra Group, when Mint contacted the lender.

Shetty is not a lone case. Getting their loans restructured has been an uphill task for some borrowers.

MORE GRIEF THAN RELIEF

After the moratorium ended in August, the Reserve Bank of India (RBI) allowed banks to restructure loans and credit card balances of borrowers who were still in financial stress. On 6 August 2020, RBI came up with a resolution framework for covid-19-related stress. The idea was to give relief to borrowers who have a track record of regular payment but discontinued paying EMIs due to job loss, salary cut or business slowdown.

The relief had to be provided in a manner that it should not extend the loan tenure by over two years. However, the regulator let the banks decide on how they provided the relief and to whom.

Most banks have claimed that only some of the borrowers who opted for the moratorium have asked for restructuring. Despite this, some borrowers are struggling even to hear from the banks on their restructuring applications or are getting responses only after a delay. According to RBI, the deadline to apply for restructuring was 31 December. If a bank accepts the application, it must implement restructuring within 90 days. None of the banks that Mint approached gave any reason for delays.

On 7 December, C.S. Setty, managing director of State Bank of India, had said that the bank had recast only 4,000 loans of the 100,000 retail borrowers who logged on to its website to check their eligibility for restructuring. Not many were found to have met the stringent conditions set by RBI. (Read more at bit.ly/sbirestructure).

“Maybe as banks have 90 days to implement the restructuring plan, they are taking time to get back. Meanwhile, they shouldn’t be sending multiple ECS requests to the bank account of borrowers who have applied for restructuring. Many borrowers who were applying online also faced problems," said Jigar Shah, a 30-year-old IT professional. Shah and 11 others had filed a public interest litigation in the Supreme Court for waiver of interest during the moratorium. The SC clubbed all PILs seeking similar relief. The court is expected to give its judgment soon.

Many borrowers who don’t have a job are looking for an extension of the moratorium. However, many banks have refused as their boards have decided against it. “If a person doesn’t have a job, lowering EMIs will be of little help," said Shah.

Mounting problems

While borrowers had to wait indefinitely to hear from the lenders on their loan restructuring applications, lenders kept sending ECS requests to borrowers’ savings accounts. In the case of Shetty, lenders tried to debit the account four times in a month.

Penalties due to the bouncing of ECS requests are adding to the financial stress, with some borrowers’ account balances turning negative, like Shetty’s.

As dues remain unpaid, lenders are passing some cases to recovery agents, posing another challenge for borrowers. Kirti Dhengle, 34, who used to work in the magnetic metal industry, lost her job in May. She has a personal loan on her credit card from ICICI Bank. Dhengle started reaching out to the lender from October onwards for loan restructuring. But while she got no guidance despite visiting a branch, she had to start dealing with the recovery agents.

The first time around, she told the agent about the restructuring request and was assured that no other agent would visit her. But when another recovery agent visited her in November, she took action. “This time, the agent threatened my parents, and I filed an online police complaint. I emailed a copy to the bank’s nodal officer," said Dhengle. After this, she said, the bank sent an email giving the link to apply for restructuring. Another email followed on 18 December in which the lender gave her details of the restructuring plan. Amid all this back and forth, the “total available balance" in her bank account has reduced to - 52,356.

When contacted, the ICICI Bank spokesperson emailed, “As per the Resolution Framework guideline, we now offer restructuring of credit facilities to help our customers tide over the financial impact. In this case, too, we have restructured the outstanding credit card balances of the customer as per her request."

PERSISTENCY PAYS

Businessman Pradip Kshetre, 45, applied for restructuring of the outstanding balance on this HDFC Bank credit card on 18 November. Kshetre had two small shops before the pandemic set in; he had to shut one of the shops and the business is slow for the other. As there was no communication from the bank, he reapplied two more times. He got an acknowledgment on 8 December. The bank offered a restructuring to him on 22 December, after Mint sent an email on the case.

Shetty, who has two loans from Kotak Mahindra Bank, also has an outstanding balance on HDFC Bank’s credit card. When he applied for restructuring on the bank’s website, it was rejected. He followed up for around a month and finally managed to get it.

When contacted for the two cases, HDFC Bank said, “As per our records, the two accounts are being restructured. We will not be able to share any further details due to reasons of customer confidentiality."

Most card issuers are not offering moratorium on outstanding balances but in cases where bank officials have been convinced about their current financial stress and their intention to repay later. Cases like Shetty’s are called deviations in banking. “Some banks have pre-approved restructuring for specific credit card customers, which is offered immediately through an online application. If a user cannot get restructuring online, he can present his case to the bank. The issuer can take a ‘deviation’ from the pre-approved portfolio and offer restructuring to such customers on a case-to-case basis," said a senior banker with a private bank, on the condition of anonymity.

Many lenders and card issuers have also done an internal scoring for customers who took moratorium to base their decision. Each bank uses different parameters, including credit score and the repayment history of the customer.

If you have still not managed to get a restructuring despite applying to the lender, presenting your current situation and following up relentlessly could help.

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