On 6 August 2020, the RBI announced a framework for a one-time restructuring of loans in its Statement on Developmental and Regulatory Policies to help borrowers manage the stress caused by the Covid-19 pandemic. This has been done by providing a special window in the Prudential Framework for Resolution of Stressed Assets (7 June 2019 circular). The framework enables lenders to implement a resolution plan for eligible corporate loans without change in ownership, while classifying such exposures as Standard, and personal loans, subject to specified conditions. Resolution under this scheme will be extended only to borrowers having stress on account of Covid19. However, the moratorium on loans which is ending on 31 August 2020 has not been extended. The scheme of restructuring of loans to MSMEs dated 11 February 2020 has also been extended and aligned with the special resolution framework for retail and corporate exposures.

An Expert Committee, headed by Mr. K.V. Kamath is expected to recommend a list of financial parameters required to be factored into the assumptions that go into each resolution plan, and the sector specific benchmark ranges for such parameters.

To refer to a summary of the RBI’s Resolution Framework for COVID-19-related Stress, dated 6 August 2020, click here.