Many individuals and small businesses across India faced severe financial strain during the second wave of COVID-19. From pay cuts and job losses to reduced customer demand and disrupted supply chains, the pressure to meet monthly loan repayments became overwhelming for thousands of borrowers.
To address this, the Reserve Bank of India introduced Loan Restructuring 2.0 in May 2021, a follow-up to its earlier relief measure from 2020. This scheme allowed borrowers to modify their existing loan terms without being marked as defaulters, offering temporary relief through lower EMIs, extended repayment periods, or moratoriums.
Whether you're a salaried employee, a self-employed professional, or a small business owner, this guide will help you understand how Loan Restructuring 2.0 works, who is eligible, and how to apply effectively.
What Is Loan Restructuring 2.0?
Loan Restructuring 2.0 is a relief measure introduced by the Reserve Bank of India (RBI) in May 2021 to support individuals and businesses affected by the second wave of COVID-19. It allowed borrowers to revise the terms of their existing loans, like extending the repayment period, reducing EMIs, or offering a temporary pause on payments without being marked as loan defaulters.
Unlike a loan waiver, this scheme does not cancel your loan. Instead, it gives you more time and flexibility to repay it during a financially difficult period.
Why Is Loan Restructuring 2.0 Important?
- Eases financial burden during income disruption: Whether due to job loss, salary reduction, or reduced business revenue, restructuring helps you manage your loan when income drops unexpectedly—without falling behind on payments.
- Prevents your loan account from turning into a default: Missed EMIs typically lead to a loan being marked as a non-performing asset (NPA). Restructuring keeps your account in good standing, avoiding legal notices or recovery proceedings.
- Offers flexible repayment options: Borrowers can request lower monthly EMIs, longer loan tenure, or even a temporary payment pause—making it easier to stay on track without overstretching finances.
- Protects your credit score from long-term damage: Although a restructured loan is marked on your credit report, it’s much less damaging than being listed as a defaulter, and can be recovered from more easily.
- Helps small businesses stay afloat: MSMEs and self-employed individuals hit by reduced cash flow can restructure their business loans to manage expenses without shutting down or laying off staff.
- Reduces the risk of legal or financial penalties: Keeping your account active through restructuring can help you avoid additional charges, penalties, or lawsuits due to non-payment.
Eligibility Criteria for Loan Restructuring 2.0
To qualify for loan restructuring under the RBI’s 2.0 framework, borrowers must meet certain conditions set by the Reserve Bank of India. These ensure that relief is offered to genuinely affected individuals and businesses facing financial difficulties due to the COVID-19 pandemic.
Below are the key eligibility conditions:
| Criteria | Details |
|---|---|
| Loan Classification | Must be a ‘Standard’ loan account as of 31 March 2021 (not overdue for more than 30 days). |
| Eligible Borrowers |
|
| Financial Impact | Must show income or business loss due to COVID-19 (e.g. job loss, reduced income, business slowdown). |
| Loan Sanction Date | The loan should have been sanctioned before or on 31 March 2021. |
| Exposure Limit | Total loan exposure across all lenders should not exceed ₹25 crore as of 31 March 2021. |
| Previous Restructuring | Borrowers who have not availed restructuring under the 2020 framework (Loan Restructuring 1.0). |
| Implementation Timeline | Restructuring must be implemented within 90 days of invoking the resolution framework. |
| Credit Bureau Reporting | Restructured accounts will be marked as "Restructured due to COVID-19", which may affect your credit score. |
Notes:
- Aggregate Exposure Limit: The total exposure of the borrower to all lending institutions should not exceed ₹25 crore as of March 31, 2021.
- Implementation Timeline: The restructuring plan must be implemented within 90 days from the date of invocation.
- Credit Reporting: Restructured accounts will be reported to credit bureaus as 'Restructured due to COVID-19', which may impact the borrower's credit score.
For more detailed information, you can refer to the RBI's official notification
Documents Required for Loan Restructuring 2.0
To apply for loan restructuring under RBI’s 2.0 framework, borrowers must provide documents that support their claim of financial hardship due to COVID-19 and verify their loan and identity details.
Below is a list of the most commonly required documents:
| Category | Documents Needed |
|---|---|
| Personal Identification |
|
| Loan Details |
|
| Proof of Financial Distress (Salaried Individuals) |
|
| Proof of Financial Distress (Self-employed/Business Owners) |
|
| Application Form |
|
Note: Lenders may request additional documents based on your profile, type of loan, or business activity.
Types of Loans Eligible for Restructuring 2.0
Loan Restructuring 2.0 wasn’t just limited to one kind of borrower. The RBI ensured the framework could support a wide range of people, whether you’re repaying a personal loan, running a small business, or part of a larger supply chain.
Here’s a closer look at the types of loans you could restructure under this scheme, what each one involves, how it helps, and where it applies in real life.
1. Individual Loans
What is it?
A loan borrowed for personal use, such as a home loan, education loan, vehicle loan (for private use), or an unsecured personal loan.
Features & Benefits:
- Applies to salaried or self-employed borrowers facing reduced income due to COVID-19.
- It lets you reduce EMIs or extend loan tenure, helping ease your monthly burden.
- Gives temporary relief without defaulting, which helps protect your credit score.
- Offers flexibility to pause payments or spread them out over a longer period.
Real-Life Example: You took a home loan two years ago, but due to a salary cut during the pandemic, you're struggling to keep up with repayments. Through restructuring, your bank agrees to extend the loan term by 12 months, reducing your EMI to a more manageable amount.
2. Business Loans (MSMEs and Non-MSMEs)
What is it?
Loans are given to businesses, including micro, small, and medium enterprises (MSMEs), as well as certain non-MSME entities with outstanding loans of up to ₹25 crore.
Features & Benefits:
- Available to eligible businesses affected by reduced sales, disrupted supply chains, or limited customer footfall.
- Lets you reschedule loan repayments to better suit your current cash flow.
- Avoid being marked as a loan defaulter, which can protect your business reputation.
- Helps maintain operations while buying time to stabilise your income and recover losses.
Real-Life Example: A boutique clothing business saw sales drop drastically during lockdowns. With fixed costs piling up and fewer customers, the owner applied for restructuring. The lender allowed the loan to be repaid over a longer term, easing financial pressure during the recovery period.
3. Special Schemes: eDFS and eVFS
What is it?
- eDFS (Electronic Dealer Financing Scheme): Helps dealers finance inventory purchases from manufacturers.
- eVFS (Electronic Vendor Financing Scheme): Provides short-term credit to vendors supplying goods to large firms.
Features & Benefits:
- Ideal for businesses involved in B2B supply chains, where payments are often delayed.
- Supports working capital needs by offering short-term credit against invoices or purchase orders.
- Allows flexibility in repayments, helping manage delayed customer payments.
- Reduces immediate cash flow pressure, keeping operations running smoothly.
Real-Life Example: A mobile phone distributor regularly buys stock from a major electronics brand using eDFS. Due to low demand during the pandemic, the distributor struggled to clear dues on time. The restructuring scheme allowed the distributor to extend repayment terms and avoid default.
Now that you know which loans qualify and what documents you’ll need, let’s walk through how to apply for restructuring under this RBI-backed scheme.
Application Process for Loan Restructuring 2.0
Applying for loan restructuring might sound like a complex task, but most lenders made the process quite straightforward, especially during the pandemic when in-person visits weren’t always possible. Whether you’re applying as an individual or business borrower, the key is to be clear, timely, and honest about your financial situation.
Here’s a step-by-step look at how the process usually works:
1. Visit Your Lender’s Website or Branch: Most banks and NBFCs created dedicated web pages or customer portals for Loan Restructuring 2.0. You can either apply online or request help by visiting your nearest branch.
2. Fill in the Restructuring Application Form: This form asks for details like your name, contact info, loan account number, type of loan, and a brief explanation of how COVID-19 affected your income or business.
3. Gather and Submit Required Documents: Submit all supporting documents—salary slips, bank statements, GST returns, or a business income summary—based on your profile. Double-check that they’re recent and clearly show your current financial position.
4. Wait for Review by the Lender: Once your application and documents are submitted, your lender’s credit or risk assessment team will review everything. They may get in touch if any additional clarification is needed.
5. Receive the Restructuring Proposal: If approved, the lender will offer you revised terms—such as a new EMI amount, extended tenure, or a short moratorium period. Make sure to review the new terms carefully.
6. Accept and Sign the Agreement: If you're ok with the new terms, you’ll need to sign an agreement or consent form (either digitally or in person). Once done, the restructuring plan is implemented and your new repayment schedule begins.
Want clarity on how loan restructuring works? Read this guide to understand the step-by-step process, eligibility, and how to apply with confidence.
Credit Score Impact and Recovery Post-Restructuring
One of the biggest concerns borrowers have about opting for loan restructuring is how it might affect their credit score. While restructuring doesn’t damage your score in the same way a missed payment would, it still gets recorded on your credit report. That said, with consistent repayments and a little planning, you can rebuild your credit profile over time.
Here’s what you need to know about the impact—and how to bounce back:
What Happens to Your Credit Score?
- Marked as ‘Restructured’: Your loan account will be flagged as “Restructured due to COVID-19” by credit bureaus. This doesn’t hurt as much as a default, but it may still raise a red flag for future lenders.
- May Reduce Borrowing Power Temporarily: Some banks and lenders might view restructured loans cautiously. You may be offered lower credit limits or higher interest rates in the short term.
- No Immediate Drop, But Watch for Delays: If you stick to your revised EMI schedule, your score may remain stable. However, delays or missed payments, even after restructuring, can seriously affect your credit health.
How to Recover Your Credit Score
- Make Timely Payments Under the New Terms: The best way to rebuild your credit score is by staying consistent with repayments under the revised plan.
- Avoid Taking on New Debt Immediately: Give your credit profile time to settle before applying for any new loans or credit cards.
- Check Your Credit Report Regularly: Monitor your credit file for any errors or updates. If you notice discrepancies, raise them with the bureau.
- Maintain a Balanced Credit Mix: Keeping a mix of secured and unsecured credit (like a home loan and a credit card) can gradually strengthen your score over time.
While restructuring may create a temporary dip in your credit journey, responsible repayment and patience can help you rebuild stronger than before.
Advantages of Loan Restructuring 2.0
Loan Restructuring 2.0 was designed to support borrowers through one of the most financially uncertain times in recent history. By allowing you to revise your loan repayment terms without being marked as a defaulter, the scheme helped protect your financial health while offering some much-needed breathing space.
Here are some of the key benefits of opting for loan restructuring under this framework:
- Avoids Loan Default: If you’re unable to make repayments due to a temporary income loss, restructuring helps you stay out of default and avoid recovery action or legal notices.
- Preserves Your Credit History: Although your credit report will show that your account was restructured, it won’t carry the same negative impact as a missed EMI or default, which can harm your creditworthiness.
- Reduces EMI Burden: The restructuring may allow for lower monthly instalments, which can make repayments more manageable—especially when your income is unstable or recovering.
- Extends Repayment Tenure: Stretching out the loan period gives you more time to repay without increasing pressure in the short term.
- Offers a Temporary Moratorium: In some cases, lenders may allow a short break from repayments to help you recover financially before resuming EMIs.
- Helps You Regain Financial Stability: By giving you space to catch up on expenses, budgeting, and income recovery, the scheme supports long-term financial planning.
- Applicable Across Loan Types: From personal loans to business loans, the scheme covered a wide range of borrowers, offering relief to both individuals and small enterprises.
If used wisely, Loan Restructuring 2.0 can act as a financial reset, helping you stay on track with repayments while giving you time to rebuild your income and stability.
And if you need instant access to funds to handle an emergency, Pocketly has your back! With easy approvals, flexible repayment options, and no credit score barriers, you can get the financial support you need, fast, hassle-free, and stress-free!
How Pocketly Makes Borrowing Easy
When financial emergencies strike, you need a quick, hassle-free solution—and that’s exactly what Pocketly offers. Whether it’s for unexpected expenses, urgent bills, or everyday cash needs, Pocketly ensures you get instant access to funds without any harsh hassles.
Why Borrowing with Pocketly is Simple & Convenient
- Quick Approvals – No waiting in long queues—just apply and get instant loan approvals in minutes.
- No Credit Score Barriers – Even if you have a low or limited credit history, Pocketly makes borrowing accessible for everyone.
- Minimal Documentation – No need for heavy paperwork—just basic KYC details and you’re good to go.
- Flexible Repayment Options – Choose an EMI plan that fits your budget, so repayments are never a burden.
- Fully Digital Process – Apply, track, and manage your loan entirely online, anytime, anywhere.
- Safe & Secure Transactions – Pocketly ensures data protection and transparency, with no hidden fees or surprises.
With Pocketly, borrowing is fast, easy, and stress-free, making sure you have access to funds right when you need them—without complications!
Let’s walk through how you can apply for a Pocketly instant loan in just a few minutes.
How to Apply for a Personal Loan via Pocketly
With just minimal yet simple steps, you can get the funds you need without delays.
- Download and Sign Up:
- Start by downloading the Pocketly app from the App Store or Play Store. Create an account using your mobile number—it’s fast, secure, and user-friendly.
- Upload Your Documents:
- No more dealing with endless paperwork. Simply upload your KYC documents through the app, it’s quick, secure, and straightforward, taking only a few minutes.
- Select Your Loan Amount:
- Choose an amount that suits your needs, whether it’s a smaller sum of ₹1,000 or something larger, like ₹25,000. Pocketly ensures flexibility to cater to your requirements.
- Quick Approval:
- Once your application is submitted, Pocketly’s system reviews it instantly. Most loans are approved within minutes, eliminating the usual waiting period.
- Receive Funds Immediately:
- Once approved, the loan amount is credited directly to your bank account. This swift process ensures that you have the money exactly when you need it.
Pocketly offers fast approvals, minimal paperwork, and flexible repayments to suit your needs.
Conclusion
Loan Restructuring 2.0 came at a time when many borrowers—both individuals and businesses, were struggling to stay financially afloat. By offering flexible repayment options, temporary relief from EMIs, and protection against defaults, this RBI-backed scheme provided a much-needed cushion during uncertain times.
However, restructuring isn’t a one-size-fits-all solution. It’s important to weigh the benefits against its short-term impact on your credit profile, assess whether your financial stress is temporary, and be prepared to stick to the revised terms. Used responsibly, it can help you regain control without long-term damage to your financial reputation.
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FAQs
1. Does loan restructuring affect my credit score?
Yes, but not in the same way as a missed EMI or default. Your account will be marked as "Restructured due to COVID-19" on your credit report. While this may affect your creditworthiness in the short term, making timely repayments under the new terms can help you recover your score gradually.
2. Can I restructure my loan if I already opted for Loan Restructuring 1.0?
In most cases, no. If you’ve already taken restructuring under the first framework announced in 2020, you're generally not eligible for Loan Restructuring 2.0—except in specific cases for MSMEs where additional relief was allowed.
3. Is there a deadline to apply for Loan Restructuring 2.0?
Yes, the RBI had set a deadline for banks and NBFCs to implement restructuring within 90 days from the date a borrower formally applied. This was a time-bound scheme and no longer applies for new applications, but understanding the process is still useful if you're managing a restructured account.
4. How quickly will my loan be approved?
The approval process is instant! After completing your application and submitting the required details, you’ll receive approval within minutes.
5. What documents do I need to apply for a loan?
Pocketly requires minimal documentation. You’ll need to provide basic KYC information like your PAN card, Aadhaar card, and bank statement, all of which can be uploaded digitally.
6. What are the repayment options available with Pocketly?
Pocketly provides flexible repayment plans that allow you to choose an EMI structure that fits your budget, ensuring a smooth borrowing experience.