Money Matters: What 'restructuring a loan' means

In a major relief to corporate and retail borrowers, the Reserve Bank of India has allowed lenders to go for one-time restructuring of loans that are facing stress owing to the COVID-19 crisis. The move is aimed at mitigating risks to financial stability. The restructuring is allowed under the framework issued on June 7, 2019.

"With the intent to facilitate revival of real sector activities and mitigate the impact on the ultimate borrowers, it has been decided to provide a window...to enable the lenders to implement a resolution plan in respect of eligible corporate exposures without change in ownership, and personal loans, while classifying such exposures as standard, subject to specified conditions," RBI said in its statement.

For corporate loans, the RBI has proposed setting up of an expert panel headed by veteran banker K V Kamath to give recommendations on various parameters to be considered for each resolution plan.