Loan restructuring allowed only for borrowers who are financially stressed due to Covid-19 

August 7, 2020 3:00 AM

The RBI will also permit conversion of debt into securities. Loans to both companies and individuals can be recast, the central bank said while tweaking the rules to enable more MSMEs to take advantage of an existing restructuring scheme.

The RBI will also permit conversion of debt into securities.

By Ankur Mishra

In a move that will bring relief to banks and borrowers, the Reserve Bank of India (RBI) has allowed lenders to restructure loans that are stressed purely on account of the pandemic. “The resolution under this facility is provided only to the borrowers having stress on account of Covid-19,” RBI governor Shaktikanta Das said on Thursday.

The rules allow lenders to extend the tenure of the loans, sanction additional credit and also provide a moratorium of up to two years. The RBI will also permit conversion of debt into securities. Loans to both companies and individuals can be recast, the central bank said while tweaking the rules to enable more MSMEs to take advantage of an existing restructuring scheme.

To be eligible, a customer should have had no more than 30 days of dues as on March 1. While banks can classify these recast exposures as standard assets, they need to make a capital provision of 10%; any bank that does not sign the inter-creditor agreement must provide 20%. Lenders must invoke a resolution plan by December 31 and implement it within 180 days from the date it is invoked.

A committee headed by former banker KV Kamath, will assist RBI with finalizing the rule and regulations for the debt recast and vetting resolution plans where the debt is more than Rs 1,500 crore.

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1RBI clears 3-member board committee to oversee Lakshmi Vilas Bank
2Decision in 2-3 days over interest on deferred instalments by banks, Centre tells SC
3People prefer saving over taking loans; bank credit at half the last year’s rate, deposits in full swing