Lending institutions must implement a system for grievance redressal in their loan restructuring guidelines. In order to be considered for a modification program, a borrower must have at least 30 days of contractual payments behind them. This is because a lender can restructure a loan under the terms of a board-approved policy. However, a lender cannot do this without first consulting the policy. This document is available online at the lending institution’s website.
Before a borrower can apply for a loan restructuring, he or she must apply to the lending institution. The application should contain all of the required documents. The lending institution will review the documents and discuss the restructuring approach with the borrower. After the lender and the borrower agree on the terms of the loan restructuring, the lender will restructure the loan and implement it in a new manner. This is a beneficial option for both parties.
Once the lender has received the necessary documents, the process begins. The borrower must submit an application with all the required documents. The lending institution will review the documents and discuss the approach to restructure the loan. After the lender approves the application, the repayment plan will be restructured and the borrower will have to repay the loan in full. The repayment period can be extended or reduced, but the loan must be in good standing.
Loan restructuring guidelines must be followed. A borrower must qualify for a loan restructuring before the moratorium expires. If he or she qualifies for a loan restructuring, the lender must ensure that he or she can meet the terms of the new terms. Once a loan is in a payment moratorium, all of the payments must be rescheduled. The bank’s credit evaluation must indicate that the borrower is capable of repaying the loan in a reasonable amount of time, typically six months. A repayment performance assessment is also necessary for a borrower to show the ability of a borrower to repay the restructured terms.
During a loan restructuring, a borrower must maintain the accrual status of the loan. During this period, a borrower’s history of making payments falls under the definition of a restructured loan in the Guide. The bank must determine whether the loan’s repayments will continue to be made after the moratorium ends. If a lender finds that the borrower is not capable of paying the restructured terms, the restructuring will end.
While a loan may stay in default after a loan restructuring, individuals that are suffering from pandemic-related issues may remain eligible for a restructuring. During this time, they must not have been in a default state for 30 days. The lender must also determine a reasonable period of sustained repayment performance for the borrower. This period is generally six months or more. This provides the bank with a reasonable assurance of the ultimate collection of the principal amount.