IDFC FIRST Bank Loan Restructuring Policy

To deal with the economic fallout and the financial stress caused by extended lockdowns due to the COVID-19 pandemic, the Reserve Bank of India (RBI) has recently issued a circular providing a framework to banks and lending institutions under which loans provided to individuals for their personal consumption and business entities for their business needs can be restructured.

This restructuring policy will be applicable only to individuals and entities that have been affected due to the COVID-19 pandemic.

Following are the most common questions and their answers regarding the policy:

FAQs

✅ Is every customer eligible for restructuring?

Only those customers who meet the below mentioned criteria are eligible for restructuring:

• Individuals & Entities (Personal Segment): Who have been classified as Standard and were not in default for over 30 days with the bank as on 01.03.2020. The customer must continue to remain standard across all their loans/facilities as of the restructuring date.
• Entities (MSME Segment): Who have been classified as Standard as on 01.03.2020 and also fulfil the following criteria:
  • The aggregate exposure of banks and NBFCs (including non-fund-based facilities) to the borrower should not exceed Rs. 25 Crores as on 01.03.2020.
  • The borrowing entity should be GST-registered on the date of implementation of the restructuring. However, the said condition does not apply to MSMEs that are exempt from GST registration. This should be determined based on exemption limit obtaining as on 01.03.2020.
• Others: Who do not fall in the above definition of Personal or MSME segment also qualify for restructuring provided they fulfil the below mentioned conditions:
  • They should have been classified as Standard as on 01.03.2020, but not in default for over 30 days with any lending institution as on 01.03.2020.
  • In case if the borrower is exposed to multiple lending institutions, the resolution framework should be treated as invoked if lending institution representing 75% by value of total outstanding credit facilities (fund as well as non-fund based) and not less than 60% of lending institution by number, agree to invoke the same.

✅ Which loans qualify under the definition of Personal segment?

As per RBI circular DBR.No.BP.BC.99/08.13.100/2017-18 dated 04.01.2018

Personal loans are those loans that are given to individuals and consist of:

• Education loan
• Consumer credit
• Loans given for creation or enhancement of immovable assets, such as housing, etc.
• Loans given for investment in financial assets, such as shares, debentures, etc.

Consumer Credit are those loans that are given to individuals and consists of:

• Credit card receivables
• Loans for consumer durables
• Auto loans (not for commercial use)
• Personal loans secured against immovable property, gold, gold jewellery, fixed deposit (including FCNR(B)), shares, bonds, etc. (not for business/ commercial purposes).
• Personal loans to professionals (not for business purposes)
• Loans given for other consumption purposes, such as social ceremonies, etc.

However, it excludes:

• Education loans
• Loans given for investment in financial assets, such as shares, debentures, etc.
• Loans given for creation or enhancement of immovable assets, such as housing, etc.
• Consumption loans given to farmers under KCC

✅ Will the following types of loans be eligible for restructuring under personal segment?

• “Loan Against Property” loans, availed for business purposes but are secured by immovable assets.
• Loans provided to individuals where the property is in their name and a related company or non individual entity is a co-borrower on the loan to supplement the income for loan repayment.

✅ If not, where would such customers be covered for COVID-19 related stress?

The above set of customers does not qualify as personal loans under the restructuring policy. In such cases, the relief for eligible borrowers may be undertaken under Part B of the Annex to the current Resolution Framework advised by RBI or under the MSME guidelines regarding restructuring of advances, subject to the borrowers being MSME.

✅ Will I be eligible for restructuring if I have taken loan after 01.03.2020 and affected by pandemic?

No, only loans which were availed before 01.03.2020 and affected by pandemic are eligible for restructuring.

✅ How can I avail the restructuring benefit on my loan?

Retail Customers can visit the bank’s website https://capitalfirst.com/customer-loan-restructuring and fill up the application form. They will also have to provide the documents and declarations mentioned in the application.

✅ Which loans are covered under this framework?

The framework covers the following loans:

• Housing & Mortgage Loans
• Vehicle Loans for Commercial Vehicles, Two-wheelers, and Used cars
• Business Loans
• Personal Loans

✅ Which documents should I submit to avail the benefit?

IDFC FIRST Bank may require you to submit the following documents depending on your employment and business type to determine the financial stress:

• Salaried Customers: Pre-COVID as well as latest salary slips and bank statements
• Self-employed Customers: GST returns, Income Tax returns, Bank statements, etc.

These documents requirements may vary depending on the type of loan availed and loan outstanding. You can visit the bank’s website for further details.

✅ What are the eligibility criteria for restructuring?

• Customers who want to apply for restructuring must have been affected financially by the lockdown due to COVID-19 pandemic in the form of reduction or loss of income which can be substantiated through:
• Reduction or suspension in salary now as compared to February 2020
• Job loss
• Closure of business or reduced business volumes
• The bank will review the application for restructuring based on documents or information during restructuring, detailed due diligence on viability of customer cash flows, customer responses, and repayment behaviour of the customer during moratorium period of March to August 2020.

✅ What restructuring options are available to me?

Restructuring options are available on login portal. Exact tenure and EMI will be decided based on the assessment by the bank.

✅ Will there be any change in EMI?

Yes, the bank will recalculate tenure and EMI and advise it to you.

✅ Will there be any processing fee or charges for loan restructuring?

Yes, the bank will levy a fee of 0.35% for restructuring a loan above Rs. 10 Lakhs.

✅ Will there be any change in the interest rate charged to my loan?

Yes, the bank will charge additional interest rate of 0.50% for loans above Rs. 10 Lakhs over and above the current interest rate for the remaining tenure of the loan in the form of risk premium.

✅ If I hold multiple loans or credit facilities with the bank, do I have to apply for restructuring separately for each of these loans?

Yes, customer has to apply separately for each loan.

✅ Will opting for the restructuring package impact my credit bureau report?

Yes. This would impact your credit standing. As per the RBI’s regulatory guidelines, your loans/credit facilities will be reported to the credit bureau as “Restructured”.

✅ Can I apply for restructuring if I have not availed moratorium?

All customers of the bank are eligible for restructuring policy irrespective of the moratorium status, subject to the borrowers meeting the bank’s approved restructuring policy and regulatory guidelines for restructuring.

✅ Till what date can I apply for relief under the framework?

The last date to apply for the relief under this framework is 24.12.2020 for personal segment, 20.03.2021 for MSME segment, and 30.11.2020 for other segment.

✅ I took my loan along with a co-borrower(s). Do I need their consent for restructuring?

Yes. All borrowers or co-borrowers of the original loan have to agree and sign on any changes in the loan structuring, including the restructuring agreement.

✅ Can I avail of an additional loan under this framework?

No.

✅ Will I be eligible for restructuring under MSME guidelines if my account is Standard as on 01.03.2020 but slipped to NPA subsequently?

Yes.

✅ Are the borrowers against whom the IDFC FIRST Bank has initiated legal recourse for DUES recovery (including under the SARFAESI Act) eligible for restructuring?

No.

✅ Am I eligible for restructuring under MSME guidelines if my account was classified as NPA on 01.03.2020 but subsequently upgraded as I paid off overdue amount?

No.

✅ Are JLG loans eligible under the Resolution Framework?

• JLG Loans for Agriculture allied activities, like dairy, fishery, animal husbandry; poultry, bee-keeping, and sericulture: Eligible for restructure under the resolution framework.
• JLG Loans for Farm Credit like KCC, Loan against Hypothecation of Crop Produce, and Pre & Post Harvest activities: Not eligible for restructure.
• JLG Loans for other than points mentioned above: Eligible for restructure under the resolution framework, depending on the end use of the loan.

✅ The Government vide Gazette notification dated 26.06.2020 had changed the definition of MSME. As the reference date for the Resolution Framework is 01.03.2020, which definition of MSMEs will be applicable for the eligibility or otherwise for resolution under the Resolution?

For the purpose of eligibility for resolution purpose under the Resolution Framework, the definition of MSME applicable is the one that existed as on 01.03.2020.

✅ If a loan account was more than 30 DPD on 01.03.2020, but subsequently got regularised through receipt of overdue, will such loan accounts be eligible for resolution under this framework?

No. Such accounts are ineligible for resolution under this framework as it is applicable only for eligible borrowers who were classified as standard, but not in default for over 30 days as on 01.03.2020.

✅ Is there any minimum cut off in regards to aggregate outstanding exposure with the banking system for mandatorily signing ICA under the framework? Also, are the ICA norms applicable to loans availed by individuals for business purposes from two or more banks?

If there are more than lending institution with exposure to a borrower whose resolution is undertaken in terms of Part B of the Annex to the Framework, all lending institutions being exposed to such borrowers are required to enter ICA.

✅ What types of borrowers or credit facilities are not eligible for restructuring (Personal and Other than Personal Category)?

The following types of borrowers or credit facilities are not eligible for restructuring under the Resolution Framework of RBI:

• Farm credit as listed in Paragraph 6.1 of the Master Direction FIDD.CO.Plan.1/04.09.01/2016-17 dated 07.07.2016 (as updated) or other relevant instructions as applicable to specific category of lending institutions.
• Loans offered to Farmers’ Service Societies (FSS), Primary Agricultural Credit Societies (PACS), and Large sized Adivasi Multi-Purpose Societies (LAMPS) for on-lending to agriculture.
• Exposures of lending institutions to Central & State Governments, Local Government bodies (such as Municipal Corporations), and body corporates, established by an Act of Parliament or State Legislature.
• Exposures of lending institutions to financial service providers. These financial service providers should have the same meaning as in sub-section (17) of Section 3 of the Insolvency & Bankruptcy Act, 2016.
• MSME borrowers whose aggregate exposure to lending institutions is Rs. 25 crores (collectively) or less as on 01.03.2020.
• Exposures of housing finance companies (HFCs) where the account has been rescheduled in terms of paragraph 2(1)(zc)(ii) of the Master Circular – The Housing Finance Companies (NHB) Directions, 2010 after 01.03.2020, unless a resolution plan under the framework has been invoked by other lending institutions. However, from this circular’s date, any resolution necessitated on account of the economic fallout of COVID-19 pandemic, should be undertaken only under this framework.