Loan Restructuring Requests: A Fair, Documented Review From Ask to Decision
Assess loan restructuring requests consistently, with clear eligibility checks, documented reasoning and borrower communication at every stage.
This is for credit, collections and risk heads at NBFCs and lenders who receive requests from borrowers in financial difficulty asking to reschedule EMIs, extend tenure or pause payments. Ad hoc decisions lead to similar borrowers being treated differently, weak documentation for auditors and restructured loans that fail again soon after. This post sets out a review process from first ask to decision and monitoring, with the documents, checks and approvals that keep it fair and defensible.
A small manufacturer tells the collections officer that a large customer has delayed payment and asks for a few months of reduced EMIs. The request is noted in a call log. Weeks later, someone in credit hears about it, asks for financials, and the borrower sends what they have over WhatsApp. Meanwhile the account slips further into delinquency, and the eventual decision is made without a clear record.
Another borrower in a similar situation, handled by a different branch, gets an informal promise of a moratorium that was never approved. Auditors later find restructurings without documented reasoning, asset classification questions are hard to answer, and some restructured accounts default again because nobody tracked them after the change.
An MSME lender in Coimbatore found that restructuring requests were being handled through informal conversations, and auditors raised concerns about undocumented changes and inconsistent treatment. The credit head introduced a formal intake form, written eligibility criteria, a cash flow template and an approval matrix by loan size. Collections staff were trained to acknowledge requests without promising outcomes. Every decision now carries a note with reasons and classification treatment, and restructured accounts are tagged in the LMS with a monthly review. Similar borrowers began receiving similar outcomes, audit queries became simpler to answer, and the team spotted re-stressed accounts earlier.
Does restructuring affect a loan's asset classification?
It can, depending on current regulatory directions, the type of change and the borrower's status. Confirm the treatment with your finance and compliance teams for each case and record it in the decision note.
What documents should a borrower provide for restructuring?
Keep a defined list by borrower type, such as recent bank statements, a short note on the cause of stress, and financials or GST returns for businesses. Ask only for what your cash flow template needs.
Can collections staff approve a short payment holiday?
Only if your approval matrix gives them that authority for defined cases. Otherwise they should log and acknowledge the request and route it for decision, avoiding informal promises.
How should we communicate a rejected restructuring request?
In writing, with the main reason, any alternative options you can offer, and how the borrower can raise a grievance. Keep the tone respectful and follow your fair practices code.
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