Personal Use Loan

Loan Restructuring 2.0: All You Need to Know

By Tata Capital
10 December 2025
8 mins read
1970

The loan restructuring 2.0 plan was introduced by the RBI to help borrowers hit by the financial impact of COVID-19. Many faced job losses, salary cuts, and business setbacks. In 2020, the RBI had announced loan restructuring guidelines to offer some relief.

However, even after the moratorium ended, many people continued to struggle. To address this, the RBI introduced Loan Restructuring 2.0 in May 2021. This framework provided added support, especially for individual borrowers trying to manage their loan repayments during tough times. To know more about what is loan restructuring 2.0, its benefits, and important points to keep in mind, read on.

Understanding the RBI’s Loan Restructuring Framework 2.0

In response to the economic challenges posed by the COVID-19 pandemic, the RBI introduced the RBI loan restructuring guidelines to support borrowers in restructuring of personal loan. The RBI restructuring 2.0 framework specifically targets individuals and small businesses affected by prolonged income disruptions, allowing lenders to revise loan terms without classifying accounts as defaults.

This includes options like EMI reduction, tenure extension, or temporary moratoriums (temporary pause on loan repayments). By following RBI restructuring 2.0, borrowers can maintain repayment continuity, manage cash flow effectively, and protect their credit profile, while lenders ensure responsible lending practices and minimise the risk of non-performing assets.

What is Loan Restructuring?

This RBI scheme allows borrowers to initiate the process of restructuring, meaning negotiating the loan terms with the lenders to avoid defaulting on their payments.

Individuals and business owners can ask for a lower interest rate, longer tenure, or flexible repayment options during this rearrangement

What is loan restructuring 2.0?

In the second framework of economic reforms for people affected by the COVID-19 pandemic, the government has provided specific rules for restructuring, meaning any individual or business opting for a loan restructuring must abide by these guidelines.

It includes information on eligible loans, excluded loans, eligibility criteria and the application process. One significant change in Restructuring 2.0 is it provides additional benefits to individual borrowers, making it a popular scheme among the public.

Benefits of Loan Restructuring 2.0

Any borrower looking for the following benefits must start their loan restructuring process immediately:

Postpone EMIs – This scheme is a perfect opportunity if you are going through a cash crunch due to the pandemic and need to delay your payments by a few months.
Reduce EMIs – Under restructuring 2.0, you can extend your loan tenure or negotiate interest rates with your lender. This can have a significant impact on lowering your monthly EMIs.
Avoid Defaulting – Missing your repayments can hurt your credit score, making it difficult for you to avail of other loan benefits in future. Restructuring your loan can help you avoid such scenarios.

Who is eligible for loan restructuring 2.0?

According to the loan restructuring guidelines by RBI, loan accounts classified as ‘Standard’ are eligible for restructuring, meaning only borrowers who have been making regular payments can avail of this facility. An inactive or defaulted loan account will be classified as ‘Substandard’ and will not be eligible for this scheme.

Also, MSMEs who have already applied for a loan restructuring framework are not eligible for this scheme. MSMEs also must fulfill some additional criteria to avail of this facility.

On the other hand, individual borrowers enjoy more relaxed eligibility criteria for loan restructuring, meaning even borrowers who have previously restructured their loans can apply for this scheme. The only requirement being the loan tenure extension must not exceed 24 months.

How will the new restructuring affect my current loan tenure?

If you opt for the new loan restructuring plan, your current loan tenure may be extended. The new timeline depends on the terms offered by the bank and the options you choose during restructuring.

Can loan restructuring affect credit scores?

After your loan restructuring is approved, it will reflect in your credit reports and history. Credit Bureau will report it as ‘Account Restructured under COVID-19’. This may limit your borrowing options for a short period.

But you can always improve your credit score by repaying your loans on time. To nullify the effects of loan restructuring, 2022 will offer you many new opportunities as the world opens after the pandemic.

Which loans are eligible for restructuring 2.0?

The RBI guidelines include many popular loans in the restructuring 2.0 framework. Here is a list mentioning some of them.

For individuals:

Housing Loans
Education Loans
Auto Loans (Not including loans taken for commercial use)
All variants of Personal Loan Restructuring (includes credit cards)

Loans for Business Purposes to Individuals:

Aggregate exposure to the lending institutions must not be more than Rs 50 Crores as of 31.03.2021.

Loans to Small Businesses:

Must be a non-MSME (includes those engaged in retail or wholesale trade)
Aggregate exposure is not more than Rs 50 Crores.
Loans under e-DFS and eVFS.

Documents required for loan restructuring 2.0

Borrowers must ascertain their eligibility for restructuring, meaning they have to provide documentary evidence to show financial distress due to COVID19. The circumstances include:

Reduction in salary or income
Job loss or Closure of business
Suspension of salary during lockdown
Reduced activity in units in case of self-employed individuals
Increased expenditure due to the borrower being affected by COVID-19

For non-business or personal loan restructuring, borrowers can provide these documents as evidence:

Salary slips for March 2021 and the latest salary slip for the last 2 months
Letter of discharge from the job (in case of job loss)
GST returns from Oct-2020 to date
Income tax returns for FY-19 & FY-20 and FY-21 (if filed)
Declaration by self-employed professionals that their business is affected by COVID-19

For more details on loan restructuring eligibility, you can visit the lender’s website to get a list of documents needed to apply for this scheme.

Key Differences: Loan Restructuring 1.0 vs Loan Restructuring 2.0

If you’re seeking to understand loan restructuring 1.0 vs 2.0, here’s a table highlighting the difference between restructuring frameworks introduced during the COVID-19 period.

Basis	Loan Restructuring 1.0	Loan Restructuring 2.0
Launch Period	August 2020	May 2021
Reason for Introduction	Immediate COVID-19 disruption and nationwide lockdown impact	Due to the prolonged second-wave that caused financial stress and delayed recovery
Eligibility Cut-off Date	Loan must be standard as of 1 March 2020	Loan must be standard as of 31 March 2021
Who Qualified	Individuals, MSMEs, and companies with COVID-related stress	Individuals and small businesses with continued income impact after first wave
Effect on Credit Profile	Marked as “restructured”, affecting credit profile	Same treatment; flagged as “restructured” by bureaus
Overall Approach	Initial emergency framework	Enhanced, follow-up framework addressing the financial stress during second-wave

Things to Consider Before Opting for Loan Restructuring 2.0

Understanding the loan restructuring pros and cons and the risks of loan restructuring can help you make an informed decision before restructuring of personal loan:

Pros

Helps manage cash-flow pressure during financial stress.
Lowers EMIs or offers temporary relief, making repayments more manageable.
Prevents the loan from slipping into default, protecting your account status.
Provides time to stabilise income without immediate penalty.

Cons

Increases the total interest payable due to extended tenure.
May affect your credit profile, as the loan is flagged as “restructured.”
Future borrowing could be assessed more cautiously by lenders.
Requires careful review of revised terms to avoid long-term repayment strain.

How to apply for loan restructuring 2.0?

To apply for loan restructuring, you can follow the steps given below:

Visit the lender’s website
Fill the application with relevant personal details
Submit the required documents
You will receive a confirmation email or SMS.
The lender will appoint a relationship manager (RM) for loan restructuring, meaning a representative will contact you to negotiate the new terms for your loan.
After the new terms are approved, you can start paying back your loan accordingly.

Conclusion

Loan restructuring, meaning a rearrangement of your loan terms, is a simple solution for the victims of an economic crisis beyond their control. But if you can hold out your funds and manage to pay your EMIs on time, you must do so.

Applying for these schemes can be time taking and requires proper documentation. Read through the loan restructuring guidelines by your lender thoroughly to avoid unnecessary complications in your application process.

If you have multiple loans, this restructuring scheme can help you manage your funds better till you recover from the effects of COVID-19. It will also reduce your financial burdens for a short while to help you concentrate on getting your career or business back on track.

If you wish to know more about loan restructuring 2022, you can visit your lender’s website or call a representative.

Apply For A Personal Loan

FAQs

Is loan restructuring good or bad?

Loan restructuring 2.0 can help if you struggle with repayments due to unexpected problems. However, it can affect your credit score and future borrowing, so it is important to understand the loan restructuring meaning before deciding.

What is a loan restructuring program?

A loan restructuring 2.0 programme is an agreement between you and the lender to change your loan terms. It often includes reducing EMIs, extending tenure, or adjusting rates to avoid default and manage repayments better.

How many times can a loan be restructured?

In most cases, loans are restructured only once. If you are wondering "can I restructure my personal loan again," it usually depends on RBI guidelines and your lender’s specific restructuring policies.

What are the risks of restructuring?

The risks linked to loan restructuring 2.0 include a drop in your credit score, a longer repayment period, and paying more interest. It is important to know the loan restructuring meaning and weigh these risks carefully before applying.

How will the new restructuring affect my current loan tenure?

If you opt for the new loan restructuring plan, your current loan tenure may be extended. The new timeline depends on the terms offered by the bank and the options you choose during restructuring.

What is loan restructuring 2.0?

Loan restructuring 2.0 was a relief framework allowing borrowers affected by prolonged COVID-19 income disruptions to modify loan terms. Lenders could extend tenure, adjust EMIs, or offer moratoriums, helping borrowers regain stability without classifying the account as a fresh default.

What is the meaning of a restructured loan?

A restructured loan is a revised borrowing agreement made when a borrower struggles to meet original terms. The lender adjusts conditions such as repayment schedule, interest rate, or tenure to make the debt manageable, aiming to prevent default while keeping the loan active and maintaining stability for both parties involved.

Who was eligible for loan restructuring 2.0?

Eligible borrowers for loan restructuring 2.0 include individuals and small businesses whose income was hit by COVID-19 after the first restructuring window. Loans had to be standard as of 31 March 2021. Borrowers also needed to demonstrate genuine financial stress and meet their lender’s internal assessment criteria.

How can loan restructuring help me?

Restructuring can ease cash-flow pressure by lowering monthly payments, extending tenure, or granting temporary relief. It helps maintain loan continuity during financial strain, reducing the risk of default. The aim is to restore repayment capacity while keeping the borrowing relationship stable.

Does loan restructuring 2.0 affect my credit score?

While restructuring of personal loan prevents an immediate default, credit bureaus usually flag the account as “restructured.” This may slightly lower your score and influence future lending decisions. However, consistently repaying after restructuring can gradually rebuild your credit profile.

How to apply for loan restructuring 2.0?

If you’re wondering how to restructure personal loan under loan restructuring 2.0 you need to contact your lender, submit a request, and provide proof of income disruption. The lender reviews financials, assesses repayment capability, and offers suitable modifications. However, the approval depends on meeting eligibility norms and the lender’s risk evaluation.

Can a loan be restructured multiple times?

It’s possible, but not guaranteed. Each restructuring depends on regulatory guidelines and lender policies. Multiple restructurings may signal higher credit risk, making approval more difficult and potentially impacting your future borrowing capacity.

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Loan Restructuring 2.0: All You Need to Know

Understanding the RBI’s Loan Restructuring Framework 2.0

What is Loan Restructuring?

What is loan restructuring 2.0?

Benefits of Loan Restructuring 2.0

Who is eligible for loan restructuring 2.0?

How will the new restructuring affect my current loan tenure?

Can loan restructuring affect credit scores?

Which loans are eligible for restructuring 2.0?

Documents required for loan restructuring 2.0

Key Differences: Loan Restructuring 1.0 vs Loan Restructuring 2.0

Things to Consider Before Opting for Loan Restructuring 2.0

How to apply for loan restructuring 2.0?

Conclusion

FAQs

Is loan restructuring good or bad?

What is a loan restructuring program?

How many times can a loan be restructured?

What are the risks of restructuring?

How will the new restructuring affect my current loan tenure?

What is loan restructuring 2.0?

What is the meaning of a restructured loan?

Who was eligible for loan restructuring 2.0?

How can loan restructuring help me?

Does loan restructuring 2.0 affect my credit score?

How to apply for loan restructuring 2.0?

Can a loan be restructured multiple times?

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