Loan Restructuring in India: Can You Restructure a Personal Loan Instead of Settling?
Updated: 5 days ago
If your EMIs have become too heavy but you still want to repay what you owe, loan restructuring is one option worth understanding before you think about settlement. Restructuring changes the terms of your loan so that repayment becomes manageable. It is not a waiver, and it is not automatic. This guide explains what loan restructuring means in India, how it differs from settlement, what RBI rules say, and how to approach your lender.
Key takeaways
Loan restructuring changes the terms of a loan (tenure, EMI, interest or moratorium) so you can keep repaying the full amount.
Lenders are not obliged to restructure a loan on request; it depends on their board-approved policies and your situation.
A restructured loan is usually reported as "restructured" to credit bureaus, which can affect your CIBIL score, though generally less than a settlement.
The special COVID-19 restructuring windows of 2020 and 2021 are closed, so today's requests are handled under each lender's own policy.
If restructuring is refused or unaffordable, settlement is another route, but it also affects your CIBIL score.
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What is loan restructuring?
Loan restructuring means your lender agrees to change the original terms of your loan because you are facing genuine financial difficulty. The aim is to make repayment possible without the account slipping into a long default.
Common forms of restructuring include:
Longer tenure: the loan is spread over more months, so each EMI is smaller.
Moratorium: a short break from EMIs, usually with interest still building up during the break.
Revised EMI schedule: lower EMIs now and higher EMIs later, often linked to an expected rise in income.
Converting overdue amounts: unpaid interest or EMIs are added into a new repayment plan.
In every case, you still repay the full dues, and often more in total interest because the loan runs longer.
Loan restructuring vs loan settlement
People often confuse these two, but they work very differently.
Restructuring: you repay the full outstanding amount under new terms. The loan stays active until it is closed normally.
Settlement: the lender accepts a lower one-time amount to close the account. RBI's June 2023 framework on compromise settlements requires lenders to have board-approved policies for this, and for non-farm loans it sets a cooling period of at least 12 months before the same lender can give you fresh credit.
Both options can affect your CIBIL score. A settled loan is reported as "settled", which many lenders view as a serious negative mark. A restructured loan is reported as "restructured", which also signals stress but shows that you are repaying in full. You can read more in our guide on how settlement affects your CIBIL score.
What do RBI rules say?
There is no RBI rule that forces a bank or NBFC to restructure your personal loan simply because you ask. Restructuring is a commercial decision made under the lender's own policies.
A few RBI rules are still useful to know:
Prudential norms: under RBI's 2019 framework for resolving stressed assets, an account that is restructured is downgraded in the lender's books and has to show satisfactory repayment for a monitoring period before it can be upgraded. This is one reason lenders are careful about approving restructuring.
COVID-19 windows: RBI's Resolution Framework 1.0 (August 2020) and 2.0 (May 2021) allowed special restructuring of retail loans. These were one-time windows and are no longer open.
Floating-rate EMI loans: RBI's August 2023 circular on resetting floating interest rates requires lenders to give borrowers of EMI-based personal loans options at the time of a rate reset, such as switching to a fixed rate, increasing the EMI, extending the tenure or prepaying. If a rate increase is what is hurting you, ask about these options.
Who is a good candidate for restructuring?
Restructuring tends to make sense when your problem is temporary and your income is likely to recover. For example:
You lost your job but expect to start a new one within a few months.
Your business income has dropped for a season but is likely to pick up.
A medical emergency or family event has used up your savings for now.
If your income has fallen permanently, or you have several loans and credit cards you cannot manage together, restructuring one loan may only delay the problem. In that case, a settlement or a combined plan across lenders may be more realistic.
How to ask your lender for loan restructuring
1. Act before the account becomes an NPA
Talk to your lender as soon as you know you will struggle. Once EMIs stay unpaid for more than 90 days, the loan is usually classified as a non-performing asset and the lender may move towards recovery action. Early requests are generally easier to discuss.
2. Put your request in writing
Write to your branch or the lender's customer care email. Explain what has changed (job loss, salary cut, medical costs), how long you expect the difficulty to last, and what EMI you can realistically pay.
3. Attach proof
Include documents such as a termination letter, salary slips showing the reduced pay, bank statements or hospital bills. Lenders assess restructuring requests on evidence.
4. Propose a specific plan
Suggest a clear option, such as extending the tenure by 24 months or a three-month moratorium. A specific plan is easier for the lender to evaluate than a general request for help.
5. Get the new terms in writing
If the lender agrees, ask for a revised sanction letter or repayment schedule showing the new EMI, tenure, interest rate and any charges. Do not rely on phone promises.
6. Escalate if you get no response
If your written request is ignored, use the lender's grievance redressal channel. If there is no reply within 30 days, or you are unhappy with the reply, you can complain under the RBI Integrated Ombudsman Scheme, 2026, through the RBI complaint portal at cms.rbi.org.in. Under the 2026 scheme, the complaint must be filed within 90 days of the lender's final reply or the end of its 30-day reply period. The Ombudsman cannot force a lender to restructure, but it can look at poor service, such as ignored requests.
What if restructuring is refused?
If your lender says no, or the restructured EMI is still more than you can pay, you have other options:
Use our loan settlement calculator to get a rough idea of where you stand.
Consider negotiating a one-time settlement, keeping in mind that it will affect your CIBIL score.
Keep a record of all calls and messages, and know your rights if recovery agents contact you.
Read our guide on legal options if you can't pay your personal loan EMI.
Frequently asked questions
Does loan restructuring affect my CIBIL score?
Yes, it can. A restructured loan is usually reported as "restructured" to credit bureaus. This tells future lenders you faced repayment stress, although it is generally seen as less negative than a settled or written-off account.
Can a bank refuse to restructure my personal loan?
Yes. No RBI rule forces a lender to restructure a loan on request. The decision depends on the lender's policy, your repayment history and your documents.
Is restructuring better than settlement?
It depends on your situation. If you can afford the full amount over a longer period, restructuring usually protects your credit profile better. If you cannot realistically repay the full dues, settlement may be the practical option, but it also affects your CIBIL score.
Can I restructure a credit card outstanding?
Many card issuers offer to convert outstanding dues into EMIs. This works like a form of restructuring. Check the interest rate and processing fee before you agree.
Talk to Loan Counsel
Loan Counsel is a Bengaluru-based debt advisory firm that helps borrowers across India with loan restructuring requests, settlements, legal notices and recovery agent issues. We have assisted 1,500+ clients and helped resolve Rs 40 Cr+ in debt. Your first consultation is free. Our fees are up to 1% of the outstanding loan per month for 3 to 6 months (Rs 5,000 minimum for loans under Rs 5 lakh), agreed before any work starts.
This article is general information about Indian lending rules, not legal advice for your specific case.
About the author
Written by the Loan Counsel team. Loan Counsel is a Bengaluru-based loan settlement and debt advisory firm, founded in 2025 by Mohammad Faizan, Rahil Saqlain Ali and Khasim Khan. We help borrowers across India settle personal and business loans and credit card dues legally, and deal with recovery harassment. Meet the team.
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