Lost job? Banks may rework your home loan

BANGALORE: If you have trouble repaying a home loan because you or your spouse lost a job or suffered a salary cut or your builder has overshot
his delivery schedule, your bank
may be willing to help by reducing the monthly repayment and extending the loan tenure. Small enterprises faced with cash flow issues are also likely to find banks far more amenable today to restructuring their loans.

Partly under pressure from the RBI and the Centre, banks are on a drive to bail out small enterprises and individuals who have started to default or are close to defaulting on loan repayments. The RBI has told banks that if a customer has been regular in his loan repayments till September 1, 2008, but has subsequently faced difficulties, the account can be restructured.

Normally, after a 90-day delinquency period, banks go about recovering the loan by measures such as attaching assets. This fresh approach could be a relief for many. But the application for restructuring, as per the RBI notification, needs to be made by March 31.

"Home loans and SME (small and medium enterprise) loans are coming up most for restructuring. Some real estate developers too are making requests," says Albert Tauro, CMD of Vijaya Bank.

Mahpara Ali, chief general manager of SBI, agrees: "We have received a fairly large number of applications for restructuring. Home loan borrowers come from good educational and professional backgrounds, so they have the intention to pay back their dues. It is just the difficult times that have compelled them to delay payments. So we are reducing the EMIs and increasing the tenure period. We tell them they can pay as much as they can now. Later, when their situation improves, we can restructure the loan again to what it was."

SMEs too have been badly hit by the slowing economy. Many have not been receiving payments on time from their customers, many others — especially exporters and auto ancillaries — have seen sales slump, forcing them to default on loans. Tauro says a short period loan repayment moratorium is being considered for deserving SMEs.

SBI estimates to restructure about 50,000 accounts for SMEs. Some banking
officials expect one to two lakh SME accounts will be restructured.

D Muralidhar, president, Federation of Karnataka Chambers of Commerce & Industry (FKCCI), says some members have applied for restructuring, and some have already received a fresh package. "But we have been getting complaints from the districts that bank branches are not taking enough interest," he says.

Even in Bangalore, not everybody is happy with the banks' approach. J R Bangera, promoter of Premier Starch Products, says he had asked for an additional loan limit because his customer payments had been delayed, and his tax payments were falling due. "But the bank has only granted an ad hoc limit for 15 days. So I'll have to go to the bank again soon. So much time is spent sitting in front of bank managers. The top brass in banks may have the right approach, but down the line, the managers don't understand the trouble we are in," he says.