Retail borrowers eyeing debt recast face an uphill task

Banks are reporting surprisingly few circumstances of retail mortgage recasts in India, amid huge job and earnings losses due to the pandemic. Several debtors took to social media to say that they’ve been unable to persuade bankers of their eligibility for mortgage recasts, presumably as a consequence of various interpretations of the central financial institution’s pointers on restructuring particular person loans.

Banks are summarily rejecting requests for mortgage recasts based mostly on their interpretation of eligibility guidelines, they mentioned.

Debt recasts sometimes contain extending the tenure of a mortgage and should embody the next curiosity payout over the prolonged interval. In some circumstances, banks additionally permit moratoriums to pressured debtors for an outlined interval, after which the compensation schedule resumes. Announcing the debt recast window, the RBI in August mentioned banks could permit debtors to additionally avail of moratoriums on restructured loans.

After laying out broad eligibility norms, RBI let particular person lenders resolve on which accounts to approve. Many debtors, nonetheless, mentioned this has led to a scenario in personal banks the place the speed of rejection of recast proposals is way larger than at public sector lenders. “In several cases where banks have agreed to allow debt recast, requests for a moratorium was rejected,” mentioned a borrower at certainly one of India’s largest personal sector banks, requesting anonymity. “It takes a lot of persuasion even to get a recast approved,” this borrower mentioned, including “banks should allow a moratorium as part of the scheme.”

Banks, on their half, preserve that they’re within the technique of figuring out pressured debtors, and figuring out real circumstances is a tedious and time-consuming course of. They ask prospects to show that that they had both misplaced their jobs or had their incomes considerably diminished by the pandemic. “Restructuring is available to customers to avail up to December 31, 2020; they can make a request, and we have a policy around how we will deal with such requests. As of 30 September, we have not granted any restructuring in any of our portfolios,” mentioned Puneet Sharma, chief monetary officer, Axis Bank.