Fri. Mar 29th, 2024
Supreme Court of IndiaThe Hindu

Synopsis: RBI announced a resolution framework to assist organisations facing financial hardship due to the coronavirus pandemic disruption. 

The Reserve Bank has told the Supreme Court that no particular plans are needed to be submitted by borrowers opting for the resolution of COVID-related stressed loans.

In the FAQs on the COVID-19 Resolution Framework related to stress, the RBI claimed that the resolution framework can be relied on by borrowers simply by sending a request to the lending institutions.

The Reserve Bank of India is India's central bank is India's central bank

A resolution framework was previously announced by RBI to assist entities facing financial stress due to interruption in regular business operation because of the coronavirus pandemic.

The additional affidavit submitted on Saturday by RBI extracts the relevant portion of the FAQ.

“Does the Resolution Framework invocation require borrowers to apply any particular resolution plan and lenders to agree before 31 December 2020, in order to adopt it?”, Read the questions.

It was mentioned that the Resolution Framework does not require any resolution plan to be submitted to the lending institutions in any form at the time of the invocation request. Instead for invocation, borrowers are required to simply submit a request for consideration under the Resolution Framework to the lending institutions. The lending institutions would then take an in-principal decision on invoking the Resolution Framework, as per their Board-approved policy.

After such invocation, RBI indicated that the specific contours of the resolution plan to be enforced may be decided, in consultation with the borrower, by the lending institutions.

“While the resolution plan is to be implemented for personal loans within 90 days from the date of invocation, a period of 180 days from the date of invocation has been prescribed for all other loans,” it was submitted.

According to the FAQ, restructuring is excluded from the scope of the Resolution Framework in respect of projects under implementation requiring deferment of the DCCO (Date of Commencement of Commercial Operations).

The banking regulator stressed that the current regulations and other related guidelines, as applicable to particular categories of leading institutions, already permit revisions of the DCCO and subsequent changes in the repayment schedule without being regarded as restructuring, subject to a maximum of four years in the case of infrastructure projects and a maximum of two years in the case of non-infrastructure projects (including commercial real estate exposures).