RBI Resolution Framework for COVID-19 Stress

During the times of any economic distress, the Reserve Bank of India generally issues a principle-based resolution framework to address the crisis situation. Accordingly, the banks implement resolution plan implemented as per the guidelines of “Prudential Framework”. This resolution plan allows granting a few concessions on account of the financial crisis of a borrower. Often these concessions result in the depreciation of the loan asset classification i.e. an increase in NPA.

As we know that the ongoing global catastrophe of COVID-19 has severely
impacted the economy, particularly the banking sector. The economic depression on account of the COVID-19 pandemic has led to great financial stress for the borrowers all over India.

With a view to revive the banking sector and mitigate the adverse impact of
COVID-19 on the borrowers, RBI has decided to facilitate a window under the Prudential Framework as to allow the banks to implement a Resolution Framework for the borrower entities.