Restructuring of loans allows borrowers to delay the repayment of the principal and the interest components of a loan. Additionally, when compared to the original loan scheme, it also allows them to pay back the loans taken under easier and more relaxed terms. Borrowers aren’t the only ones who benefit from loan restructuring schemes. Even lenders gain a whole lot from it, since it gives them a lot of freedom and flexibility. Restructuring of loans also keeps Non-Performing Assets (NPAs) from increasing, which in the current situation is the need of the hour for banks and financial institutions.
With respect to loan restructuring, it remains to be seen as to what the Kamath committee recommends. Most experts believe that the committee would put the onus on the lenders and the borrowers to come up with a one-time restructuring plan that suits both the parties.
That said, the procedure for restructuring of loans is likely to involve either one or a combination of the following actions.
For borrowers, the right way to go about this situation is to try and settle the deferred EMIs including any interest that might have accrued during the moratorium period. Despite the apparent financial burden, this is the option that would cause the least amount of penal repercussions. Also, by settling the dues as soon as possible, borrowers can bounce back on track much faster.
For borrowers looking for other sources of income or funds to repay their loans, one way out is to book profits on any mutual fund or equity investments they may hold. The gains derived from the sale of such investments can help repay the outstanding loan amounts. And while loan restructuring can help borrowers out, it is advisable to use this route only after exhausting all the other options.