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Tata Capital > Blog

All you need to know about Prime Minister’s Rozgar Yojana

Welcome to the incredible world of opportunities presented by the Prime Minister’s Rozgar Yojana (PMRY)! Launched in 1993, PMRY is like a magical key that opens doors to self-employment for young minds. It acts as a beacon of hope, offering a chance to turn aspirations into reality. 

Imagine having the power to start your own shop, provide a service, or create something amazing – that’s exactly what PMRY can help you achieve.

Key Features of Prime Minister’s Rozgar Yojana

FeaturesDetails
Repayment TenorThe repayment period spans from 3 to 7 years after a moratorium period, allowing flexibility for entrepreneurs to settle comfortably.
Project Cost CoveragePMRY provides financial coverage of up to Rs. 2 lakh for service and trade sectors and up to Rs. 5 lakh for the industrial sector.
Collateral-Free LoansEntrepreneurs can secure loans of up to Rs. 1 lakh without the burden of providing collateral, making it accessible and stress-free.
Subsidy for IndividualsPMRY offers a generous subsidy of 15% of the project cost, with a maximum cap of Rs. 12,500 (Rs. 15,000 in specific regions), lightening the financial load for beneficiaries.

This financial lifeline aims not just to provide funds but to empower and uplift those with entrepreneurial dreams.

PM Rozgar Yojana Loan Eligibility Requirements: –

Becoming a part of the PMRY initiative involves meeting specific eligibility criteria that are designed to be inclusive and encouraging:

1. Age: The age requirement is set between 18 to 35 years, ensuring that a broad range of young individuals can benefit from the scheme.

2. Education: A minimum educational qualification equivalent to 8th standard pass is necessary, making it accessible to a diverse group of potential entrepreneurs.

3. Residence: A residency requirement of at least 3 years in a given area establishes a connection with the local community.

4. Family Income: The family income range between Rs. 40,000 and Rs. 1 lakh reflects the scheme’s focus on supporting those with varying financial backgrounds. A clean payment record without defaults to nationalized financial institutions ensures a responsible approach to financial commitments.

Meeting these eligibility requirements unlocks the gateway to self-employment through PMRY.

Prime Minister Rozgar Yojana Pmry Application Process –

Embarking on the journey with PMRY is a straightforward process, emphasizing simplicity and accessibility for aspiring entrepreneurs:

1. Project Finalization: Entrepreneurs start by finalizing their business plans, a crucial step in shaping their vision for self-employment.

2. Form Submission: Filling out a form and attaching the required documents is the next step, making the application process systematic and organized.

3. Interviews: Selected candidates are called for interviews, an opportunity for them to showcase their passion and commitment to their business ideas.

The simplicity of this process ensures that potential entrepreneurs can navigate the application journey with ease, fostering a supportive environment for their dreams.

Reservations for SC/ST/OBC Candidates: –

PMRY goes the extra mile to ensure inclusivity and support for specific groups through reserved opportunities:

1. SC/ST: A 22.5% reservation is in place to provide additional support and opportunities for individuals from Scheduled Castes and Scheduled Tribes.

2. OBC: With a 27% reservation for Other Backward Classes, PMRY aims to create an inclusive platform for individuals from diverse backgrounds.

3. Others: In cases where SC/ST and OBC categories may not fully utilize the reservations, individuals from other categories are also considered, promoting fairness and equal opportunities.

These reservations reflect the commitment of PMRY to providing opportunities for all, irrespective of background or community.

Prime Minister Rozgar Scheme Training and Repayment Details: –

PMRY not only provides financial assistance but also places emphasis on training and structured repayment plans:

1. Training: Training under PMRY is a valuable aspect, with a maximum cost of Rs. 1,000 per case. This training equips individuals with the skills and knowledge necessary for their chosen business ventures.

2. Repayment Schedule: Repaying loans under PMRY is designed for ease and flexibility, with a repayment period ranging from 3 to 7 years after the initial moratorium period. This ensures that entrepreneurs have time to establish and stabilize their businesses before commencing repayments.

The focus on training and flexible repayment plans showcases PMRY’s holistic approach to supporting individuals on their entrepreneurial journey.

Advantages/Benefits of Pm Rozgar Loan Yojana –

Choosing PMRY for your entrepreneurial dreams comes with a multitude of benefits that make it a standout option:

1. Collateral-Free Loans: The comfort of securing loans up to Rs. 1 lakh without the need for collateral provides financial freedom and reduces stress for budding entrepreneurs.

2. Subsidy: A subsidy of 15% of the project cost, with a maximum cap, ensures that entrepreneurs receive substantial financial assistance, encouraging the pursuit of diverse business ventures.

3. Flexible Repayment Plans: The flexibility of a repayment period spanning 3 to 7 years after the moratorium period allows entrepreneurs to manage their finances effectively and plan for the long term.

PMRY is not just a financial support system; it’s a comprehensive package aimed at empowering and nurturing entrepreneurial spirits.

Conclusion

As we conclude our exploration of PMRY, envision the possibilities that this initiative opens for you as a young entrepreneur. The features, eligibility criteria, application process, reservations, training, and benefits all align to create a supportive environment for your business dreams.

PMRY is not just about financial assistance; it’s about nurturing your entrepreneurial spirit and guiding you towards self-sustainability. Ready to embark on your entrepreneurial journey? Visit TATA Capital and unlock the doors to your business aspirations today!

FAQs

1. How do I apply for PMRY?

Applying for PMRY is a straightforward process. Once you finalize your project, fill out a form, attach the necessary documents, and submit it either at the District Industries Centre (DIC) or your bank. The application is then reviewed, and selected candidates are called for an interview.

2. Are there reservations for SC/ST/OBC?

Yes, PMRY ensures reservations to promote inclusivity. There is a 22.5% reservation for Scheduled Castes (SC) and Scheduled Tribes (ST) and a 27% reservation for Other Backward Classes (OBC). In cases where these categories may not fully utilize the reservations, individuals from other categories are also considered.

3. What training will I get under PMRY?

PMRY offers training as part of its support system. The selected candidates undergo training with a maximum cost of Rs. 1,000 per case. This training equips individuals with the necessary skills and knowledge required for their chosen business ventures.

4. How do I repay under PMRY?

Repaying loans under PMRY is designed to be convenient and flexible. The repayment schedule ranges from 3 to 7 years, starting after the initial moratorium period. This allows entrepreneurs to establish and stabilize their businesses before commencing repayments.

5. What are the benefits of PMRY?

PMRY comes with several benefits to support budding entrepreneurs. These include collateral-free loans up to Rs. 1 lakh, a subsidy of 15% of the project cost, and flexible repayment plans spanning 3 to 7 years after the moratorium period.

Union Budget 2022: What to Expect from Budget 2022?

The year has started in full swing and has brought with it expectations for a better financial year. Now, with a few weeks left before the announcement of the union budget,expectations have started pouring in. From real estate, retail to banking services, and education, every sector is anticipating its share of benefits in the upcoming budget.

So, what to expect from budget 2022?Here are a few predictions.

1. Healthcare

Amidst the rising concerns for the Omicron variant, there is also an increasing need for better healthcare facilities. No doubt then, healthcare is expecting some big announcements. Keeping this in mind, the government will likely announce a 10 to 12 % rise in healthcare expenditure. This would mean an additional allocation of Rs. 18,000 crores in its overall package of 223,846 crores for the healthcare industry.

Moreover, the allocated fund of Rs. 50,000 crores for the vaccine is likely to be present in Union Budget 2022as well. You can also expect to witness improved healthcare infrastructure in the country as the government prepares to curb the spread of COVID-19.

2. Real estate

To facilitate a strong revival in the post-pandemic period, the real estate industry is expecting tax relaxation and a reduction in GST from the budget 2022. The sector is expecting incentives for private investments in the affordable housing sector and GST waiver on under-construction properties.

Furthermore, the real-estate experts are anticipating the standardisation of registration charges by bringing them under the GST.

Additional Read – Budget 2022: Key Highlights and Takeaways

3. Farming and agriculture

The government is likely to increase the farm credit target to Rs. 18 lakh crores to ensure the availability of credit to farmers. The agriculture credit level has consistently increased over the years, and reached 16.5 lakh crores in 2021-22.

And, why not? Crop loans from financial institutions play a vital role in boosting the output of the farming sector. It also helps prevent the farmers from borrowing from unregulated sources at higher rates.

4. Home loans

Considering applying for a home loan in 2022? Well, there might be some good news for you!

As per Budget 2022 expectations, the government may extend higher tax deductions on home loans to increase housing demand and offer relief to potential home buyers. Tax deduction for home loan repayment on principal will likely increase to Rs. 2 lakhs from the existing Rs. 1.5 lakhs.

Moreover, expectations to allow lenders to extend up to 90% of the cost of the property have increased. If done right, the move will bring a major boost in the sector, encouraging increased investment and affordable loans to homebuyers.

Additional Read – Reasons Why Budget 2022 will be Focusing More on Affordable Housing

In conclusion

The fiscal budget 2022-23 is expected to be presented on February 1, 2022. If the expectations are correct, the government policies and financial incentives this year will surely bring a huge relief to the public. Whether it is a home loan or reasonable healthcare, you can expect great benefits.

And if you find yourself in need of affordable loans this year, turn to Tata Capital for the best finance options!

Here’s Why You Should Link PAN With Aadhaar Before 31st March

Wondering why you need to link PAN with Aadhar online? Here’s your answer.

In case you haven’t linked your Permanent Account Number (PAN) card to your Aadhaar card, you must do so by March 31, 2022. That’s because neglecting it might attract a penalty of Rs. 1,000. Previously, the deadline to link your Aadhaar card with PAN was December 31, 2021. The deadline, however, is now extended by the central government to March 31, 2022.

Previously, PAN card Aadhar card link rules did not attract a penalty. However, the new regulation states that if you fail to link the two identity documents, your PAN card number will become invalid. This means you won’t be able to perform basic financial transactions that require PAN details.

So, if your PAN card is not connected to your Aadhaar, you won’t be able to open a bank account and file an Income Tax Return (ITR). Or, if you are an investor, you won’t be qualified to invest in mutual funds schemes or park funds in stocks, among other things. Why? That’s because furnishing the PAN card is obligatory in all these cases.

But that’s not it! Failure to perform PAN Aadhar linking may also result in you shelling out a higher TDS amount along with a penalty of Rs. 10,000. This penalty will be imposed on you as per Section 272B of the Income Tax Act if you fail to produce the PAN as and when required.

Additional Read – What is Video KYC & How You Can Avail it for Personal Loan?

How to Link  Aadhaar Number with PAN Card?

Here’s how you can link PAN and Aadhaar card:

Step 1: Visit the new e-filling ITR website at www.incometax.gov.in.

Step 2: Here, when you are on the homepage, find the link that says, ‘Our Services.’ Click on this to proceed.

Step 3: Now, input details including your PAN card, name, Aadhaar number, contact number, etc.

Step 4: After that, you must check the box which reads, “I have only a year of birth in my Aadhaar card” if required.

Step 5: To proceed, click on the box that reads, “I agree to validate my Aadhaar details.” Press on continue.

Step 6: Lastly, you will receive a six-digit One Time Password (OTP). You will get the OTP on your registered phone number. Input the OTP on the verification page.

Step 7: Press on the option that says ‘Validate’ on the screen.

Additional Read –How Technology Has Changed the Way We Apply for a Personal loan

Checking Aadhaar link status

After following the linking procedure, if you want to check the status, visit the same portal at www.incometax.gov.in. Now, follow the steps below:

Step 1: Press on the option that says, “Aadhar Link Status,” located right under the “Link Aadhar.”

Step 2: Enter your PAN card number along with the Aadhar number.

Step 3: Press on “View Link Status.” Now, you can easily check your PAN-Aadhaar number link status.

When sailing through difficult times of the pandemic, if you’re looking for financial support, you can turn to India’s leading lender – Tata Capital. Get quick access to funds through personalised loans at competitive interest rates, flexible tenures, and custom EMI plans. Check out our loan offerings today.

What does RBI’s New Auto-Debit Rules Mean for You?

If you are someone who uses mobile wallets or debit/credit cards for recurring payments and auto-debit activities, there are a few changes in store for you. The Reserve Bank of India (RBI) has laid out new auto-debit rules effective October 1, 2021. Let’s dive deeper to understand what the new rules are and what they mean for you.

What are the new auto-debit rules?

RBI has introduced a new feature called Additional Factor Authentication (AFA) to make digital transactions safer and protect customers from fraudulent activities. As per the new norms, financial institutions will now ask for additional authentication for recurring payments of Rs. 5000 and above.

They are also mandated to notify the customers at least 24 hours before the payment is deducted. Unlike before, the transaction will only be allowed if the customer gives permission using a One Time Password or OTP.

As a result, customers now have the facility to view, modify, even opt-out of a particular mandate or recurring transaction by using the link provided in the pre-debit notification. This link will state the amount, merchant’ name, due date, and reference number. However, the rule only applies to:

a)     Credit cards

b)     Debit cards

c)     Unified Payments Interface (UPI)

d)     Prepaid Payment Instruments (PPI)

In a nutshell, service providers must inform the customers in advance when a recurring payment is due to carry out the transaction. All auto-debit transactions will continue to happen automatically, but only after receiving authentication from the customers themselves. 

Although the changes were supposed to come into effect from April 1, 2021, RBI extended the deadline to help financial institutions comply with the new rules and implement them effectively.

Additional Read: RBI announcements to support MSME recovery post-second wave

What is the objective?

According to the RBI, auto-debit transactions on third-party merchant websites were susceptible to fraud, and customers often fell prey to data breaches. Moreover, customers didn’t have the power to opt out of service during debits. To safeguard the customers’ interest and make online transactions more secure, RBI is now mandating the two-factor authentication method.

These rules are part of risk mitigation measures and further enhance customer convenience and bolster the safety of digital payments. Simply put, they aim to provide more power in the customers’ hands and protect their data. Besides, the additional factor authentication will also provide more flexibility to the customers if they change their minds and wish to annul a particular service.

The services affected by the newly modified RBI guidelines include –

·        Subscription renewals with over the top (OTT) platforms like Spotify, Amazon Prime, Netflix, etc.

·        Insurance premium

·        DTH subscriptions

·        Payments of mobile bills

·        Utility bill transactions

More importantly, the new guidelines will only impact standing instructions on cards, cheque books and auto-debit facilities. They are not applicable for equated monthly instalments for loans, insurance premiums or financial instruments like mutual funds and SIPs.

How will the new rules affect you?

Wondering how these new guidelines will affect your day to day transactions? Here are a few pointers that will tell you everything you need to know:

·        You will receive a pre-debit notification or OTP through SMS/email 24 hours before the debit for recurring payments exceeding Rs. 5000.

·        You can use the link provided in the notification to opt out of the transaction.

·        You will have the liberty to modify, view, or cancel any standing instructions (SI) set on your card. Plus, you can set a maximum amount for each SI.

·        If you have given standard instructions for subscriptions on websites like Netflix, Amazon, YouTube, etc., you will have to update them.

·        If you use any third-party merchant websites to auto-pay your bills, you must re-register and update your payment details before the period ends.

Although RBI has constructed a framework for financial institutions to implement the new feature, many merchants and institutions lack the platform for this fundamental shift. They must develop their subscription management platforms soon to comply with the latest auto-debit guidelines. Meanwhile, consumers should wait for operational clarity from their service providers.

Once the needful is done, you’ll need to re-register yourself in each of the payment instruments you use for recurring mandates or transactions. These include credit cards, debit cards, and UPI. Thereafter, you will need to approve every auto-debit request beforehand to ensure a successful debit. 

Additional Read: Everything you need to know about RBI’s Loan Structuring Scheme

To sum up

Are you currently servicing a loan with Tata Capital and are worried about the new auto-debit guidelines? Well, fret not! You don’t have to worry about your monthly EMIs yet. Since the mandate doesn’t impact monthly instalments, your EMIs are not likely to face any turbulence.

To know more about Tata Capital’s loan offerings, visit our website or contact us today!

Key Points to Consider While Applying for Loan Restructuring

COVID-19 brought in its wake one of the gravest economic crises Indians have ever witnessed. And loan borrowers had to face the worst of it, as they had to manage their EMIs alongside a cash shortage.

Now, with the coming of the second wave, borrowers are under financial pressure yet again as states have imposed fresh lockdown restrictions. Fortunately, RBI has reintroduced the loan restructuring scheme to give borrowers some flexibility till they get back on their feet.

If you’re a long-time Tata Capital customer with a loan that you’d like to restructure, here is all the information you need.

What is loan restructuring?

Loan restructuring allows borrowers under financial distress to modify or renegotiate the loan terms, like an EMI moratorium or rescheduling of repayments, with the lender to avoid EMI defaults.

If you’re finding it challenging to manage your loan repayments, restructuring your loan might be the way to go. Here are some key points to consider while applying for loan restructuring with Tata Capital.

Key points for loan restructuring

  • With loan restructuring, you can extend your loan tenure for up to two years
  • The restructuring option is only available for business loan borrowers, micro, small, and medium enterprises (MSMEs), and small businesses.
  • You can only avail of restructuring if you have outstanding loan dues of up to Rs. 50 crore.
  • Any overdue charges will not be restructured.
  • You can’t restructure your loan if you already opted for it under the previous year’s scheme. However, you have the option of extending your loan moratorium period by two years.
  • You can apply for the scheme up to 15th September 2021.

Additional Read: RBI Loan moratorium Extension: Repayment period extended

How to apply for loan restructuring with Tata Capital?

We at Tata Capital offer a seamless restructuring experience for all our existing customers. So if you have a loan with us, here’s how you can get it restructured.

For retail loan borrowers

Step 1: Head over to our website and click the ‘Login’ option in the top-right corner.

Step 2: Select the “Retail Customer Login” option from the drop-down menu.  Next, enter your registered phone number/email address/user ID, and enter the correct OTP to log in.

Step 3: Select the Customer service > Raise New SR tab

Step 4: Once you’re on the loan restructuring page, follow the instructions prompted on the screen.

Step 5: You may need to provide a fresh NACH mandate for EMI repayments on your existing bank account.

For overdraft customers

Step 1: Visit our website and click on the ‘Login’ button located on the top right.

Step 2: From the drop-down menu, select the “Dropline Overdraft Loan” option. Next, enter your password and user ID to log in.

Step 3: Click on the “Apply for Loan Restructuring” tab.

Step 4: Once you land on the loan restructuring page, follow the instructions to complete your application.

You can also write a mail to or call our customer care to apply for restructuring. Else, visit our nearest branch.

Parting thoughts

If you have a loan with Tata Capital, you can apply for loan restructuring to ease your financial burden. Log in to your Tata Capital account today to begin your loan restructuring process.

Everything you need to know about RBI’s Loan Structuring Scheme

The economic fallout due to the pandemic left millions with severe economic hardships. Both business owners and employed individuals had a tough financial time last year, especially those who had loans to their names.

To offer relief, RBI announced a loan moratorium and loan restructuring policies. This allowed individuals and businesses to put their loans on hold or modify their original loan terms.

However, due to COVID-19’s second wave, many borrowers are facing a financial crunch again. Considering the situation, RBI has renewed its loan restructuring policies to help micro, small, and medium enterprises (MSMEs), small businesses, and individual business loan borrowers with their loan repayments.

Here’s all you need to know about the restructuring scheme and its various aspects.

What is loan restructuring?

Restructuring is a process through which loan borrowers facing financial distress can renegotiate the loan terms to avoid non-repayment or EMI defaults. It helps borrowers increase their repayment tenure, reduce the loan EMI, or change the repayment frequency.

Who is eligible?

The scheme is open for individual business loan borrowers, MSMEs, and small businesses. However, you can only avail of the restructuring benefits if:

  • If you have an outstanding business loan dues of up to Rs. 50 crore
  • If RBI has classified your account as standard as of March 31st, 2021
  • If you didn’t avail of loan restructuring under any previous restructuring scheme

Benefits of the loan restructuring scheme

Under the restructuring scheme, you can extend your loan tenure by two years and also get a loan moratorium for the same period. Here, the moratorium is a duration in which one doesn’t have to pay the loan EMIs. During your moratorium period, the interest is applicable, and it continues to accrue on your repayment liability.

Also, if you had your loan account restructured last year, you are still eligible for the loan moratorium. However, your remaining tenure can only extend up to two years.

The scheme is open until September 30th 2021, and you can apply for it by getting in touch with your lender. But remember that the moratorium period will begin after 90 days from the date of application.

Additional Read: RBI Loan moratorium Extension: Repayment period extended

Should you restructure your loan?

Any tenure extension or moratorium period can only ensure temporary financial relief. Why? Because the overall interest payable increases upon restructuring. Loan restructuring can also impact your credit score and loan eligibility.

If you can afford to make your EMI payments on time, don’t opt for the scheme. And before you apply for the restructuring scheme, make sure it is your last resort.

Final thoughts

If you’re an existing Tata Capital customer, you can seamlessly restructure your loan with us within a few steps. All you have to do is log in to your Tata Capital account, provide a few necessary details, and we’ll take it from there. Explore our loan restructuring services and check your eligibility.

To know more, get in touch with us today!

RBI Governor Announces Strong Banking and Industry Measures to Fight COVID-19

The second wave of the COVID-19 pandemic has proved to be deadlier for India than perhaps any other country. As the world’s largest vaccination drive continues, some more good news came after yesterday.

The RBI Governor Shaktikanta Das, reemphasised his belief that India will soon be out of these tough times, and announced a slew of measures to uplift our pandemic-hit economy. The address, which happened early morning on May 5, brought with it interim relief for the banking and the SME sector.

Much needed economic relief is finally here!

Before we dwell on what the announcement means for individuals and institutions, here are the key highlights of the Governor’s address:

  • Das began by extending an on-tap liquidity scheme of Rs. 50,000 crores with a short 3-year tenure to various entities fighting COVID. These include vaccine manufacturers, suppliers, importers, priority medical device manufacturers, pathology labs, and ventilator and oxygen suppliers. Under this scheme, the RBI extends loans to amplify the COVID healthcare infrastructure to beat the deadly second wave.
  • Financial institutions are being incentivised and given a free hand for priority lending till 31st March 2022 to various hospitals, vaccine logistics sector, oxygen suppliers and COVID drug manufacturers.
  • Same as last year, financial institutions will open a 2nd lending window for individuals and small borrowers who wish to avail of quick loans or restructure old ones. The limit for this lending measure goes up to Rs. 25 crores.
  • To avail of the incentives mentioned above earlier, an applicant had to successfully finish their KYC by visiting their lender – something unideal during the second COVID wave. This is why KYC completion will temporarily switch to a virtual medium for specific categories.
  • State governments will be able to avail of the overdraft facility with ease until September 30th, 2021.
  • The RBI allocated Rs 10,000 crores for small finance banks. The Central Bank is mobilising funds into these institutions for further distribution to individuals as well as industry.

The impact of the latest RBI measures on diverse entities

Until the ferocious second COVID wave dies down, these measures will benefit a broad spectrum of entities, especially the SME and MSME sector and individual borrowers. Here’s how:

Loan restructuring for SMEs

By making easy credit available or by allowing SMEs to restructure their loans, the authorities will ensure that production doesn’t halt. Since SMEs can reach out to lending institutions for priority loans, they will avoid cash flow from drying up.

SMEs will also manage to purchase and pay for raw materials on time, and the workers will not be kept from their daily, weekly or monthly wages.

Allocation of Rs. 10,000 crores for small finance banks

Not only SMEs and the healthcare infrastructure stand to benefit from this allocation, but also small banks and individuals. Given that the measures announced open the second window of extending loans to individuals and small-time borrowers, lending institutions will likely witness a spike in people opting for personal loans.

Since the primary objective is to safeguard human life, ease of receiving personal finance can go the distance in shielding the most vulnerable of the population from the economic slump brought upon by the second wave.

Rationalization of KYC norms

What good are these reforms if individuals and organisations are not given an easy way to fulfil their KYC requirements? Without KYC compliance, no lending institution, including the Central Bank can disburse monetary benefits to the borrowers. However, with the second wave thwarting movement and promoting partial lockdowns across the country, visiting your lender is near impossible.

To counter this logistical issue, the Governor announced rationalisation of KYC compliance that allows you to give your KYC details over a video call. Such a thing removes the final hurdle hindering your chances at receiving finances.  

Concluding thoughts – This too shall pass!

Towards the end of the governor’s address, he echoed Mahatma Gandhi’s words “our faith should be like an ever-burning lamp which not only gives us light but also illuminates the surroundings”.

In lieu of this, the measures proposed by the RBI governor urges all stakeholders to make the most of the benefits extended. The second COVID wave is surely crippling but not something Indian citizens can’t overcome. What’s more, we already have the experience to back on from last year, especially when it comes to dealing with a pandemic-helmed economic downturn.

The RBI stands firm with its measures around priority lending, loan restructuring and KYC norms rationalisation. Doing this ensures that India’s financial workings remain favourable and the markets stay functional. Given that the Central Bank is now working more closely than ever with the Government to alleviate the economic and infrastructural tribulations unfurling in the country, the future looks bright.

As one of India’s leading financial institutions, Tata Capital is committed to putting up a strong fight against the pandemic’s repercussions. We continue doing our bit by extending priority loans to SMEs and MSMEs at an affordable interest rate with customisable repayment terms. As an institution, we are hopeful and unwavering in our commitment to help the economy come back to life soon!

Loan moratorium can be extended by 2 years: Govt

We are facing what is probably the gravest economic crisis in at least a decade. At least 40 lakh young Indians have lost their jobs owing to the lockdown, and lakhs of others have been facing pay cuts. Loans have become a burden on many people.

The Reserve Bank of India (RBI), on the 27th of March, 2020, announced that borrowers can now avail a moratorium of three EMIs due between the months of March and May 2020. This was applicable to different categories of loan including personal loan. The moratorium was further extended by another three months, which ended on the 31st of August, 2020. What exactly is a moratorium and what lies in store for borrowers now? Let’s have a look.

What is a loan moratorium or EMI moratorium?

Since salaries were affected to a great extent, so were repayment capabilities. Failing to pay EMIs would’ve affected people’s credit scores by forcing lenders to classify their loans as NPA (Non-Performing Assets). To solve the problem on a temporary basis, a relief or loan moratorium of six months was provided. This allowed borrowers to defer loan repayments by six months without their loans becoming NPAs. Meanwhile, your loan keeps accumulating interest.

Additional Read: Monetary Relief Measures in the Time of COVID-19

Loan moratorium Extension

What next?

Since the EMI moratorium period is over, there was further discussion on extending benefits to borrowers since the economy is still in a very bad shape and people are only facing bigger financial constraints. The earlier moratorium facility could’ve been availed by anyone regardless of the lockdown’s effect on their finances. However, now, a restructuring option has been made available for genuinely affected citizens.

What is restructuring and which loans can be restructured?

Under the new scheme, you can get your loan restructured and get an extended EMI moratorium upto 2 years.

Technically, the Reserve Bank has announced restructuring as an option to all personal loans. It must be noted that the term ‘personal loan’ here includes all types of secured and unsecured loans such as consumer loans, home loans, education loans, loans against financial assets granted to an individual.

What is the eligibility criteria for loan restructuring?

The first criterion for being eligible for loan restructuring is that your repayment capacity should be seriously affected by the lockdown. This could include losing a salaried job, a reduction in salary, as well as being self-employed and unable to repay your loan. You can approach the bank with your termination letter or pay cut letter or bank statement or any other document that helps the bank conclude your inability to repay the loan.

The second criterion is that your loan must not be overdue by greater than 30 days as on the 1st of March, 2020. If your loan was already an NPA on the aforementioned date, it won’t be eligible for restructuring.

Even if you have paid your EMIs on time and not availed the loan moratorium option previously, you can be eligible for restructuring; given that you can prove your incapacity to repay your loan due to the pandemic. In case you had availed the loan moratorium before, the moratorium period will be excluded while calculating your outstanding period.

Additional Read: What are the Effects of Coronavirus Pandemic on Personal Loan Repayment?

What are the terms for restructuring?

  • The specific terms for restructuring will differ from one bank to another.
  • Banks have the right to refuse restructuring on the basis of borrowers’ financial standing and credit history.
  • You can surely negotiate terms with your bank, including extension of loan period with reduction of EMI amount.
  • If you stick to the restructured plan offered by your bank, your loan will be treated like a regular loan and your credit rating will remain unaffected.
  • You need to approach your bank by the 30th of December, 2020 to apply for restructuring of your loan.

Is restructuring advisable?

If you have been facing a financial crunch due to the lockdown and are finding it very tough to repay your loans, you should opt for restructuring. Do remember that this will be reported to CIBIL. However, it won’t affect your credit score as bad as an NPA would.

Conclusion

It is only in our best interests that facilities like EMI moratorium have been made available to us. Be assured and avail them as long as you take an informed and prudent decision. If you have been cash-strapped and are wondering about where to get a personal loan in the first place, don’t fret. Tata Capital’s Personal Loan can fulfill your immediate financial requirements ranging from marriage to medical needs with flexible terms, tenure, and quick access to money.

Additional Read: Why Are More and More People Opting for Personal Loan After COVID 19?

RBI press conference on monetary relief measures

The Covid-19 pandemic has wreaked havoc across the world. Global economic growth has collapsed with several countries expected to witness a recession in 2020-21. To control the spread of the disease, the Indian government had to extend the nationwide lockdown for the fourth time, albeit with certain exemptions.

Both the government and the Reserve Bank of India have announced several measures to provide relief to borrowers and financial institutions amid the Covid-19 crisis. The Reserve Bank of India Governor Shaktikanta Das, today, announced a fresh set of measures to provide additional relief to borrowers. The announcement comes on the heels of an Rs-20-lakh-crore economic package announced by the finance minister in five tranches.

Moratorium Extension

The Reserve Bank of India allowed the extension of the moratorium on monthly payments for term loans by three months till August 31. The fresh announcement extends the moratorium granted in March, which was slated to end on May 31. It essentially allows a six-month moratorium on loan EMIs from March 1 to August 31.

The extension is expected to provide major relief to borrowers, especially self-employed individuals, who were facing a liquidity crunch due to loss of income. Missing monthly payments in the normal course of business would mean a negative impact on the borrowers’ credit profile. All term loans such as home loans and car loans granted by commercial banks, co-operative banks, all-India financial Institutions and Non-Banking Financial Companies, including Housing Finance Companies and Micro Finance Institutions can qualify for the moratorium.

The Reserve Bank of India has categorically stated that the extension will not lead to any changes in the terms and conditions of the loan agreements. It means if a borrower decides to defer monthly payments during the moratorium period, it will not be categorised as a default by the lender and hence will have no impact on the credit score of the borrower. On the other hand, the central bank has also eased the asset classification norms for lending institutions and has allowed the exclusion of the deferment period from the 90-day NPA norms.

The moratorium announced by the central bank is not a waiver and borrowers will have to pay the interest on the outstanding loan amount. The RBI has also allowed lenders to convert the accumulated interest on working capital facilities over the period of moratorium into a funded interest term loan. The funded interest term loan will have to be paid during the current financial year. In March, the central bank allowed lending institutions to recalculate the working capital cycle of all borrowers who had availed working capital by way of cash credit or overdraft facilities.

Additional Read – Highlights from all 5 tranches of COVID Relief package by the Finance Minister of India

Repo Rate Reduction

The RBI governor has often spoken of taking calibrated measures to ease the liquidity pain in the economy. With the finance minister already announcing a slew of fiscal measures, it was time for RBI to step in. Along with the extension in the moratorium, the central bank today announced a 40-basis-point cut in the repo rate to 4% from 4.4%. The monetary policy committee held an out-of-cycle review meeting to decide on the reduction in the policy rate. In line with the reduction in repo rate, the reverse repo rate has been cut to 3.35% from 3.75%. The reduction in the repo rate is expected to spur financial institutions to lend more and increase liquidity in the market. It will also help banks lower interest rates on term loans like home loans, which will help in attracting undecided customers into the market.

Other Announcements

With the spread of the infectious disease refusing to slow down, RBI expects growth to be negative in the current fiscal. The central bank expects growth to pick up gradually in the second half of the fiscal year with the trajectory depending on the progress of the pandemic.

The RBI expects headline inflation to fall below its medium-term target of 4% in the third or fourth quarter of the fiscal year.

The central bank announced a line of credit worth Rs 15,000 crore to EXIM Bank for 90 days with a rollover of up to one year.

The RBI has provided a special refinance facility worth Rs 15,000 crore to SIDBI for 90 days for lending and refinance operations in one of its earlier announcements. The central bank announced a further rollover of 90 days for the refinance facility at the end of the initial 90-day period. 

The rules for withdrawal from the Consolidated Sinking Fund has been eased by RBI, resulting in the release of an additional Rs 13,300 crore for the states.

Steps to apply for collateral-free MSME loans under the COVID-19 Relief package

The Indian Prime Minister’s address to the nation had kicked off a flurry of activities from the finance minister and she responded by making five tranches of announcements to bring the Indian economy back on its rails.

The MSME sector is among the largest contributors to the Indian GDP at about 30% and definitely the largest contributor to exports at about 50%. It is also the second largest employer, next to agriculture, providing employment to about 11 crore Indians.

The sector hosts a massive number of MSME entities that operate in India. There are over 63 million units spread equally in the rural and urban areas. Owning to the lockdown the economic activity has come to a standstill and the MSMEs are the hardest hit. It is little wonder that the finance minister announced some important measures to revitalize the sector.

One of the major measures is the collateral-free automatic loans worth Rs 3 lakh crore guaranteed by the Central Government with liberal terms benefitting 45 lakh MSMEs.

Additional Read – Check out the new MSME insolvency codes from COVID-19 Relief Package

This measure is aimed at the viable MSMEs and the terms of the loan are

Eligibility

  • Viable standard account MSMEs 
  • Turnover of less than Rs 100 crore
  • Outstanding of less than Rs 25 crore
  • No additional collateral
  • Loan fully guaranteed by the central government

Features

The features of the automatic loan extended to MSMEs are as follows:

  • 20% of outstanding loan as on 29 February 2020
  • No additional collateral
  • Loan fully guaranteed by the central government; risk weight is zero
  • 12 month moratorium on principal repayment
  • 4-year tenure
  • No guarantee fee
  • Scheme open up to 31 October 2020
  •  

Interest

The interest can vary depending on the lender as follows:

  • Banks –  marginal cost lending rate plus 1 percent
  • NBFC – up to 14%

Other terms

  • MSMEs with more than one lender can avail from any one lender
  • RBI approval required for government guarantee
  • Lender will have second charge of assets already pledged

Based on the above eligibility conditions and other terms MSMEs can apply to bank, the Small Industries Development Bank of India (SIDBI), National Credit Guarantee Trustee Company Ltd (NCGTC) and NBFCs. These lending institutions have sent proposals to the government for approval and once the approval is received MSMEs can apply to these agencies and avail the automatic loan as per eligibility conditions.

Additional Read – 3 Lakh Crore COVID Relief Package for MSMEs: How will this benefit the MSMEs and Start-ups?

The automatic loan scheme is likely to help 45 lakh MSMEs spurring them into revitalizing their business with ready credit available to them. They have four years to repay the loan and one year moratorium on principal repayment. Thus, these MSMEs have one year to recoup their businesses to pre-Covid-19 period without any cash flow on financing the automatic loan.

On the other side banks and other lending institutions should be ready to lend as the loans are fully guaranteed by the central government. Hitherto, though flush with funds, banks were not ready to lend.

With these and other measures, the government hopes to revive the economy.