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Resolution window under June 2019 circular only for COVID-19 related stressed assets: RBI Governor

Special window under Prudential Framework will enable lenders to implement a resolution plan without a change in ownership, and personal loans, while classifying such exposures as standard subject to specified conditions

twitter-logoBusinessToday.In | August 6, 2020 | Updated 16:53 IST
Resolution window under June 2019 circular only for COVID-19 related stressed assets: RBI Governor
Prudential Framework on Resolution of Stressed Assets provides a principle-based resolution framework for addressing borrower defaults under a normal scenario

RBI Governor Shaktikanta Das, in the Monetary Policy Committee meeting's announcements on Tuesday, said a special resolution window under the June 2019 circular was only available to COVID-19 related stressed assets. The window has been provided to facilitate the revival of real sector activities and mitigate the impact on the ultimate borrowers, it said.

The special window under the Prudential Framework will enable the lenders to implement a resolution plan without a change in ownership, and personal loans, while classifying such exposures as standard subject to specified conditions, the RBI Governor's statement said. However, the resolution window facility is available only to the COVID-19 related stressed assets. "Besides, the crucial aspect of maintaining financial stability has also been suitably factored in," the RBI Governor said.

The "Prudential Framework on Resolution of Stressed Assets", announced on June 7, 2019, provides a principle-based resolution framework for addressing borrower defaults under a normal scenario.

Under the special window, lenders must keep additional provisions of 10 per cent on the post-resolution debt; the resolution plan may be invoked anytime till December 31, 2020, and should be implemented in 180 days from the date of invocation; the framework is not available for exposures to financial sector entities as well as central and state governments, local government bodies and corporate firms established by an Act of Parliament or State Legislature.

RBI Governor Shaktikanta Das, announcing the MPC's by-monthly meeting's decision today, kept interest rates unchanged at 4 per cent to help tame inflation that in recent times had surged past 6 per cent mark. He said the economy was in an extremely weak condition following the pandemic.

The RBI forecast a contraction in real GDP growth for April 2020 to March 2021 fiscal. Other major announcements of the MPC meeting are a Rs 10,000 crore additional special liquidity facility for the housing sector and smaller non-bank finance companies (NBFCs); implementation of a resolution plan for corporate loans without change of ownership; permission to corporate and MSME borrowers to restructure debts; and raising the limit of loans that can be availed against gold and jewellery.  

Also read: K V Kamath to head RBI panel for resolution plans amid coronavirus stress


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