Credit restructuring applies to all credit substitutes: RBI
The Reserve Bank of India (RBI) clarified that the loan resolution framework can be invoked for investment exposures that are credit substitutes like corporate bonds and commercial papers.
“The resolution framework can be invoked for the resolution of all exposures of credit institutions to eligible borrowers, including investment exposures,” the RBI said in a clarification on the Covid stress resolution framework. However, the resolution framework is without prejudice to any applicable guidelines issued by relevant financial sector regulators and other departments of the RBI with respect to any particular exposure.
All loans from microfinance institutions and self-help groups that meet basic eligibility criteria, unless covered by specific exclusions, are eligible for resolution but personal loans in these categories will not be eligible for resolution. recast, said the RBI.
The RBI clarified that the loans which remained standard without default on March 1, 2020, will be eligible for restructuring under the pandemic-Related resolution framework published in August. The RBI said a loan account that was more than 30 days past due as of March 1, 2020, but which was subsequently regularized, will not be ineligible for resolution under the resolution.
Allied agricultural activities beyond reach
All agricultural credit exposures, including NBFCs, can be recast under this scheme, but loans to related activities such as dairy, fishing and animal husbandry are excluded from the scope of the framework. resolution.
Indeed, the restructuring framework is only applicable to eligible borrowers who have been classified as standard as of March 1, 2020, he said. However, these accounts can still be resolved within the prudential framework of June 7, 2019, the central bank said.
Likewise, the regulator said that the restructuring of under-executed project loans involving a postponement of the start date of business operations (DCCO) is excluded from the scope of the resolution framework and that these accounts will continue to apply. be governed by February 7, 2020, and other relevant instructions applicable to a specific category of credit institutions. In addition, in the case of multiple lenders to the same borrower whose resolution is undertaken, all credit institutions will have to enter into an inter-creditor agreement.
The clarification also states that the new definition of micro, small and medium-sized enterprises (MSMEs) as of June 26 will not affect their eligibility for the resolution but will be based on the definition that existed on March 1, 2020.
He also clarified that all agricultural credit exposures, including NBFCs, can be recast under this scheme, but that loans to related activities such as dairy, fishing, livestock, poultry, etc. beekeeping and sericulture are excluded from its scope.