In order to help retail borrowers hit by COVID-19, the Reserve Bank of India (RBI) has envisaged a separate resolution plan to deal with borrowers facing financial stress due to the pandemic.
The new resolution plan, which can be availed till December 2020, offers rescheduling of payments, conversion of any interest accrued, or to be accrued, into another credit facility, and granting of moratorium, based on an assessment of income streams of the borrower, subject to a maximum of two years. Under the new framework the tenure of the loan may also get modified. The moratorium period, if granted, will come into force immediately upon implementation of the resolution plan.
Borrowers can avail the new resolution plan by December 31, 2020, and the same must be implemented within 90 days from the date of invocation. The banks and financial institutions can also implement it earlier than the stipulated 90 days.
However, only those borrowers will be eligible for the resolution under the framework, whose accounts are classified as standard at the time of invocation of resolution framework. For this purpose, the date of invocation should be the date on which both the borrower and lending institution had agreed to proceed with a resolution plan under this framework.
The resolution plan will be implemented only after all related documentation, including execution of necessary agreements between lending institutions and borrower and collateral provided, is completed by the lenders concerned, the changes in the terms of conditions of the loans get duly reflected in the books of the lending institutions, and borrower is not in default with the lending institution as per the revised terms.