On 5 May, 2021, the RBI released the Resolution Framework 2.0 to help mitigate the potential financial stress of individual borrowers, small businesses and MSMEs due to the resurgence of the COVID-19 pandemic. As per RBI guidelines, Axis Bank is now offering the option of personal loan restructuring to eligible borrowers who have been severely impacted by the pandemic. Opting for this restructuring framework is optional and it is advisable that borrowers should continue making their regular EMI payments if possible. This will minimize the potential impact on credit score as well as reduce additional interest charges in the long term.
What is Loan Restructuring?
The Axis Bank COVID 19 Loan restructuring framework is approved by RBI and its main goal is to relieve the loan repayment burden of borrowers whose financial situation has been adversely impacted by the resurgence of the Covid-19 pandemic. The relief offered through the one-time loan restructuring option provided by Axis Bank may include either of the following:
- Moratorium and/or extension of residual loan tenure up to a maximum of 24 months
- Conversion of any interest accrued (or to be accrued) into different credit facility
- Revisions in working capital sanctions
- Rescheduling of payments
- Conversion of a portion of the debt into equity or other marketable, non-convertible debt securities issued by the borrower
- The valuation of equity instruments issued
The list of options mentioned is indicative in nature and Axis Bank, after assessing the impact of the financial stress on the borrower, may at its discretion apply one of the above methods or a different method to provide relief to eligible borrowers on a case-by-case basis.
Not all personal loan borrowers of Axis Bank are eligible to opt for this one-time restructuring facility. Only those who have been financially impacted by the COVID-19 pandemic and fulfil the following criteria are eligible:
- Individuals who have availed a loan for personal consumption.
- Individuals who have availed the loan for business use. However, their aggregate exposure should not exceed Rs. 50 crore from all lending institutions as on 31 March, 2021.
- Small businesses, like those engaged in retail and wholesale trade, except for those classified as MSMEs as on 31 March, 2021. However, their aggregate exposure should not exceed Rs. 50 crore from all lending institutions as on 31 March, 2021.
- As of 31st March, 2021, the borrower should be classified as “standard”
- The borrower should not have availed any resolution in terms of Resolution Framework 1.0 except, where the borrower has been permitted no moratoria or moratoria of less than 2 years and / or extension of residual tenure by a period of less than 2 years. In these cases, the bank can modify such plans only to the extent of increasing the period of moratorium or extend the residual tenure for a maximum period of 2 years, and the consequent changes necessary in the terms of the loan for implementing such Extension. However, as part of the Resolution Framework 2.0, Axis Bank shall only increase the moratorium period and/or extend the remaining tenure to an extent that the combined period covered under Resolution Framework 1.0 and 2.0 does not exceed 2 years.
The applicant needs to provide clear evidence of financial stress due to the COVID-19 pandemic. Such stress can include:
- Salary reduction/job loss or cash flow impact on business for self and/or family members
- Reduced repayment ability due to medical emergency/emergency expenses incurred by the applicant/family members
- Applicant is employed in a COVID-19 impacted sector/residing in a containment zone or impacted due to continued lockdown due to the pandemic
The applicant will be required to provide documentary evidence in support of the above before the loan restructuring application is approved. Additionally the bank will also take into account the ability of the applicant to repay the outstanding loan according to the revised schedule before making its final decision.
In order to provide documentary evidence of financial distress due to the pandemic and an inability to repay the outstanding personal loan according to the original schedule, Axis Bank requires the submission of various documents that differ based on the applicant’s profile.
For Salaried Applicant
Salaried applicants applying for the COVID-19 loan restructuring plan offered by Axis Bank need to submit the following documents:
- KYC documents (Aadhaar, Passport, etc.) of borrower and guarantor
- Previous 12 months’ bank statement of applicant(s)
- Salary slips for the past 6 months with banking details
- Income Tax returns for the previous 2 years
- Latest Form 16 or Form 26AS for FY 19-20 and FY 20-21 (till date)
- Employment termination/salary deferment/salary reduction letter from employer
For Self-Employed Applicant
Self-employed borrowers are also eligible to apply for the one-time loan restructuring plan offered by Axis Bank and need to submit the following documents at the time of application submission:
- KYC documents (Aadhaar, Driving License, etc.) of borrower(s) and guarantor(s)
- Business bank account statement of applicant/promoter(s)/business owner(s) for previous 12 months
- Form 26AS for FY 2019-20 and FY 2020-21 (till date)/ Latest GST Returns (if applicable)
- Audited financials as of March 20 along with income tax returns
- Provisional or unaudited financials for March 2021 (if available)
In addition to the above mentioned documents, Axis Bank may ask applicant(s) for additional supporting documentation on a case-by-case basis.
How to Apply
Borrowers who wish to apply for one-time loan restructuring can do so through a request letter/ digital consent/ voice consent covering the specific reasons for applying for resolution framework 2.0 and plan of future cash flows.
Q1. Will my CIBIL score be affected if I opt for restructuring?
If you avail loan resolution, the applicable loan will be marked as “restructured” in your credit report. Subsequently, the impact on CIBIL score/credit score will be in line with the applicable policies of the respective credit information company.
Q2. How long does Axis Bank take to communicate its decision on my loan restructuring application?
Axis Bank usually communicates its decision through electronic means or in writing regarding the rejection or approval of your loan restructuring application within 30 days of receiving the application. However, do remember that approval of the restructuring decision is not guaranteed and may vary on a case by case basis.
Q3. Is restructuring of my Axis Bank personal loan mandatory?
No. Loan restructuring is optional and available to those facing financial distress due to the COVID-19 pandemic. You should continue making your regular EMI payments as per the original schedule if you can afford to do so.