The Reserve Bank of India (“RBI”), in a Notification dated 6th August, 2020 introduces a “Resolution Framework for COVID-19-related Stress” which aims to facilitate revival of real sector activities and mitigate the impact of the Covid-19 pandemic on the ultimate borrowers.
RBI acknowledging the financial stress caused to borrowers on account of the Covid-19 pandemic has provided a window to enable lenders to implement a resolution plan in respect of eligible corporate exposures without change in ownership, and personal loans, while classifying such exposures as Standard, subject to specified conditions. This facility has been provided under the Reserve Bank of India (Prudential Framework for Resolution of Stressed Assets) Directions 2019 (“Prudential Framework”).
Lending Institutions must only extend this facility to borrowers having stress on account of Covid19. For which they must have a Board approved policy detailing the manner of the evaluation and the objective criteria that may be applied while considering the resolution plan in each case.
This facility would extend to certain categories of Lending Institutions not originally covered by the Prudential Framework. For all resolution plans implemented under this facility all the norms applicable to implementation of a resolution plan, including the mandatory requirement of Inter-Creditor Agreements (ICA) must be implemented.
The Annexure to the Notification contains the prudential boundaries and other details of the facility.
Source: Reserve Bank of India
