RBI Says Only standard loan accounts as of March 1 can be recast under pandemic scheme-
According to The Reserve Bank of India (RBI) guidelines the loans which have remained standard without any defaults as of March 1, 2020, will be eligible for restructuring under the pandemic-related resolutionframework issued in August.RBI said that any loan account that was due for more than 30 days as on March 1, 2020, but subsequently got regularised, will not be ineligible for resolution under the COVID-19.
According to new policy addition to the provision for restructuring of large corporate loans and personal advances, stressed MSME borrowers will also be allowed to restructure their debt provided they were classified as standard on March 31, 2020. This window will be available till March 2021,resolution framework.
The new policy of Reserve bank of India has clarified that the new definition of micro, small and medium enterprises effective from June 26, will not effect their eligibility when applying for a loan restructuring process. However, it will be depends on the definition that existed as of March 1, 2020.The Reserve Bank of India has decided to permit a one-time restructuring of loans, amid the ongoing Covid-19 crisis which is hitting businesses hard and the crisis based.
According to the PTI News report the central bank issued a classification last night to borrowers as well as lenders in connection to the August 8 circular. RBI said a loan account due for more than 30 days as on March 1, 2020, but subsequently got regularised, will also not be allowed under the Covid-19 resolution framework.
Announcing a review on monetary and credit policies on Thursday, RBI Governor Shaktikanta Das said a window under the June 7 stressed asset resolution framework will be provided which will enable lenders to implement a resolution plan, without a change in ownership.
The RBI has prescribed a clear monitoring time period for accounts which are the restructured under this policy. This time period begins from the date of implementation till the point of in time when the borrower pays back at least 10% of the residual debts.
About the Loans against property (LAPs), availed for business purposes but are secured by immovable assets, will not be treated as individual loans and they will be eligible for resolution under Part B of the framework. The same applies to loans granted to individuals where the property is in the name of an individual and a related company or a non-individual entity has been taken as co-borrower on the loan structure to supplement the income for repayment of loan.
For the purpose of eligibility for resolution under the scheme framework, the definition of micro, small and medium enterprises (MSME) that would be applicable is the one that existed as on March 1 , and not the revised one under the gazette notification dated June 26. Only such resolution plans which receive a credit opinion of RP4 or better for the residual debt from a credit rating agency (CRA) shall be considered for implementation under the framework. In case credit opinion is obtained from more than one CRA, all such opinions must be RP4 or better, the central bank said.