FAQs on Resolution Framework for Covid-19 related to stress

Rajdeep Saini

22 Oct, 2020

Q1. What is the point of this Resolution Framework?

Answer: The main aim of this resolution framework is to offer a relief to units who otherwise have a better track record, but whose maneuver has been unfavorably affected by the Covid-19 pandemic and their debt burden becoming unequally relative to their cash flow production skills.

Q2. What are the conditions of eligibility for my unit to qualify for relief under the Resolution Framework?

Answer: To be eligible under the Resolution Framework, the following conditions need to be fulfilled:

• The loan of an individual should be in  the “Standard Account” as on the application’s date and have been ‘Standard’ and also not in a failure to pay for not less than 30 days as on 1^st March 2020.
• The operations of your units should have been impacted by the corona virus pandemic as a result of which your revenues/ cash flows have deescalated drastically and you are not in a position to service your debt/ loan installments.

Q3. What documents are required to be provided along with the application for being considered for the assistance under this resolution Framework?

Answer: An Individual or corporate entity required by submitting the following documents:

• Board Resolution (in case of a corporation) stating that the operations of the company are under the stress on account of coronavirus. In the case of other applicants, an undertaking, that unit’s operations are under stress on account of Coronavirus.
•  GST returns from the month of April 2020 till the most recent available month and also for the consequent period of the previous year.
• In the case of companies that are listed, the latest financials filed with Stock Exchanges to be submitted.
• Projected financials and Cash budget for the period of the loan.
• Any other document as recommended by your Relationship Manager /Branch Manager.

Q4. Which are the loans not come under the ambit of this Resolution Framework of RBI?

Answer:  The following loans are not covered under this Framework:

• MSME borrowers whose cumulative exposure to lending institutions jointly, is Rs.25 crore or less as of 1^st March 2020.
• Farm credit.
• Loans to Farmers’ Service Societies (FSS), Primary Agricultural Credit Societies^[1] (PACS), and huge sized Adivasi Multi-Purpose Societies (LAMPS) for on-lending to agriculture.
• Introduction to financial service providers including NBFCs.
• Exposures to state and central Governments, Local Government bodies (e.g. Municipal Corporations), and body corporate recognized by an Act of Parliament or State Legislature.

Q5. How to apply for relief under the above Resolution Framework?

Answer: One can submit their request at the Branch where your account is sustained or otherwise contact you’re Relationship Manager and propose your request.

Q6. What is the last date to apply for relief under the resolution Framework?

Answer: For loans with collective exposure of Rs.1500 crores or more from the system of banking, the last date for it is 15.November.2020.

For others, the last date to apply for assistance under the resolution Framework is 30^th November, 2020 (However, it would be prudent to submit your applications on 15^th November.2020).

Q7. What is the process of obtaining relief if I am banking with a Consortium?

Answer: If there are numerous lending establishments in a consortium with exposure to the borrower, the declaration process shall be treated as invoke in respect of any borrower if the lending establishment representing 75 per cent by value of the total outstanding loan facilities and not less than 60 % of the lending organization by number agree to invoke the same.

Q 8. What is the timeline for implementation of the Resolution Plan?

Answer: The Resolution Plan to be put into practice within a period of 180 days from the date of invocation. If the above-mentioned timeline is violated at any point, the resolution process ceases to apply instantly in respect of the borrower’s concerns. Any resolution plan executed in breach of the above predetermined timelines shall be fully administered by the extent Prudential Framework of RBI, as if the process of the resolution was never invoked under this resolution framework for corona virus-related stress.

Q9. What are the relaxations /relief accessible under the Resolution Framework in the matter of Term Loans?

Answer: The following relaxations /relief accessible are obtainable in case of Term Loan, respect to compliance of norms of bank:

• Moratorium of up to two years for the reimbursement of principal installments.
•  Addition in the tenure of the loan by up to the highest of two years.
• Moratorium of interest up to an utmost of six months. The interest accumulated during the moratorium period to be capitalized.

Q10. What are the relaxations /relief accessible under the Resolution Framework in the matter of Working Capital Loans?

Answers: The following relaxations /relief accessible under the Resolution Framework in a matter of Working Capital Loans, respect to compliance of norms of bank:

• The moratorium’s interest for up to six months which is repayable within the highest period of two years.
• Need based supplementary funding may supply which shall be repayable in not more than five years.

Q11. Will any Processing Fee be paid under Resolution Framework?

Answer: Upfront fee/ Processing fee at the rate of 0.25% of the cumulative limits will be payable.

Q12. Will there is any alteration in pricing of my loans?

Answer: Yes, there will be alteration in the pricing to counterbalance the cost of supplementary provisions that the Bank is obligatory to make for extending the reimbursement under this Framework. The pricing under this would be:

• WCDL /FITL/WCTL/ authorized under the resolution Framework: 100 bps over your current price on Working Capital Loans.

Any allowance provided during the period of resolution must result in right of the reward.

Q13. Whether any added security will have to be contributed in case of relief under the resolution framework is sanctioned?

Answer: The following additional security will have to be furnished:

• In case of an unlisted body, a Personal Guarantee of the promoters will have to be provided.
• In the case of the listed business, promoters will have to guarantee their shares.

Q14. What ratios have been arranged by RBI composed by Expert Committee for various industries?

Answer: The ratios agreed by RBI that is intended as floors or ceilings, as the case may be.

Conclusion: