Please refer to Prudential Regulations for Consumer Financing as amended from time to time.

Based on review of Prudential Regulations for Consumer Financing and feedback of the stakeholders, following amendments are made with immediate effect:

1) Part-C
The following new regulation will be added after Regulation-5 in the Part–C of the Prudential Regulations for Consumer Financing:

Regulation R-5A
Rescheduling / Restructuring of Non-Performing Consumer Loans:

a) Banks/DFIs should frame policy for rescheduling/ restructuring of non-performing consumer loans. The policy should be approved by the Board of Directors or by the Country Head/Executive/Management Committee in case of branches of foreign banks.

b) For the purpose of rescheduling/ restructuring, banks/DFIs may:

i) Club or consolidate outstanding amounts on account of personal loans and credit cards and create one loan. The new loan so created shall be placed in the lowest category of classification amongst the classifications of the loans clubbed.

ii) Convert revolving facility into an installment loan.

iii) Change the tenure of the loan by maximum two years beyond any regulatory cap on maximum tenure.

c) Rescheduling/ restructuring should not be done just to avoid classification of loans /advances and provisioning requirements. In this connection, banks /DFIs shall ensure that consumer financing facilities of any borrower should not be rescheduled/ restructured more than once within 12 months and three times during five year period.

d) While considering rescheduling/restructuring, banks/DFIs should, interalia, take into account the repayment capacity of the borrower. The condition of 50% of Debt Burden Requirement (DBR) mentioned at Regulation R-3 of Prudential Regulations for Consumer Financing shall not be applicable to loan rescheduled/ restructured. However, any new consumer financing facility extended to a borrower who is availing any rescheduled/ restructured facility shall be subject to observance of minimum DBR prescribed in the Regulation R-3 of Prudential Regulations for Consumer Financing.

e) The status of classification of the non-performing loans shall not be changed because of rescheduling / restructuring unless borrower has paid at least 10% of the rescheduled / restructured amount or six installments as per terms & conditions of the rescheduling/ restructuring. However, for internal monitoring purpose, banks/DFIs may re-set the dpd (days past due) counter of the newly created loan to “0” dpd.

f) Provisions already held against non-performing loan, to be rescheduled /restructured, will only be reversed if condition of 10% recovery or six installments is met.

g) If the borrower defaults (i.e. reaches 90 dpd) again within one year after declassification, the loan shall be classified as under:

Type of Consumer Loan	Classification
Unsecured	Loss
Secured	Same category in which it was prior to rescheduling / restructuring.  Banks /  DFIs, however, at their discretion may further downgrade the  classification  based on their own internal policies.

2) Regulations for Credit Cards
Regulation R-7: Maximum Card Limit:

The following paragraph will be added in Regulation R-7:

Banks/DFIs may merge the clean limits to single person for Credit Cards and Personal Loans subject to the condition that total clean limit availed by him/her from all banks/DFIs does not exceed Rs. 2,000,000 at any point in time. It is re-emphasized that the aggregate clean limit of the borrower should not exceed Rs. 2000,000 in any case.

3) Regulations for Personal Loans including Loans for the Purchase of Consumer Durables
Regulation R-23: Clean Limit per Person for Personal Loan:

The following paragraph will be added in Regulation R-23:
Banks/DFIs may merge the clean limits to single person for Personal Loans and Credit Cards subject to the condition that total clean limit availed by him/her from all banks/DFIs does not exceed Rs. 2,000,000 at any point in time. It is re-emphasized that the aggregate clean limit of the borrower should not exceed Rs. 2000,000 in any case.

All other instructions on the subject shall, however, remain unchanged.

Please acknowledge receipt.