RBI Guidelines On Restructuring Of Loans
This is called Resolution Framework 2.0
RBI Guidelines on Restructuring of Loans of the stressed of Micro, Small and Medium Enterprises (MSMEs) due to covid 19.
In view of the uncertainties created due to the Covid-19 pandemic in India in the first quarter of this year.
RBI has decided to extend the restructuring facility to stressed Micro, Small, and Medium Enterprises (MSMEs) loans and asked banks to do this without a downgrading in the asset classification.
Who are eligible for restructuring under Resolution Framework 2.0
(i) This restructuring facility to those borrowers whose accounts classified as a micro, small or medium enterprise as of March 31, 2021. In terms of the Gazette Notification S.O. 2119 (E) dated June 26, 2020.
(ii) GST-registered businesses are eligible for implementation of the restructuring. MSMEs are exempted from GST registration to be eligible for restructuring.
(iii) The Total exposure, including non-fund-based facilities, of all lending institutions to the borrower does not exceed 25 crores as of March 31, 2021.
(iv) The borrower’s account was a ‘standard asset’ as of March 31, 2021.
(v) The borrower’s account was not restructured last year as per the first relief of rbi guidelines for moratorium.
Last date of restructuring is before September 30, 2021.
The restructuring final only when the lending institution and the borrower agree to proceed with the efforts towards finalizing a restructuring of the loan to be implemented in respect of such borrower.
Borrower have to apply for the restructuring of the loan to their lending institutions in written and the bank will reply to the borrower within 30 days
A lending institution can take decision of restructuring having exposure to a borrower. Independent decisions are taken with other lending institutions, if any, having exposure to the same borrower.
The restructuring of the account is implemented within 90 days from the date of invocation.
Some of borrowers is not registered in the Udyam Registration portal. They should register before the date of implementation of the restructuring.
All the lending institutions may issue restructuring guidelines at the earliest but before the 30 days from RBI circular.
If some accounts slipped to NPA after 1st April 2021. These accounts eligible for this restructuring and the date of restructuring may be upgraded as ‘standard asset’.
All working capital sanctioned limits and/or drawing power should be reviewed based on a reassessment of the working capital cycle, reduction of margins, etc.
Lending institutions issue proper standard operating procedures to filed functionaries to complete the task before September 30, 2021. The reviewed sanctioned limit/drawing power shall be subject to review. The lending institution at least on a half-yearly basis and the renewal/reassessment at least on an annual basis. The annual review shall be expected to suitably modulate the limits as per the then-prevailing business conditions.
The above measures shall be flexible on the lending institutions satisfying themselves that the same is required on account of the economic fallout from Covid-19.
Accounts availed relief under these instructions shall be subject to supervision frequently. Relating their justifiability on account of the economic fallout from Covid-19.
These RBI Guidelines on Restructuring of Loans of the stressed of Micro, Small and Medium Enterprises (MSMEs) due to covid 19 are applicable to the following.
Nationalized Banks, Private Banks, Small Finance Banks, Regional Rural Banks. Primary (Urban) Co-operative Banks/State Co-operative Banks/ District Central Co-operative Banks.
All Non-Banking Financial Companies (including Housing Finance Companies)
