Debt Availed After March 1 Eligible Under Covid Restructuring Scheme: RBI

The Reserve Bank of India has clarified that debt availed after March 1, 2020, will be eligible for restructuring under the Covid-19 scheme. The clarifications came in a set of frequently asked questions issued by the regulator on Tuesday.

The one-time restructuring scheme was announced by the regulator on Aug 6.

In its FAQs, the RBI clarified that “the actual debt that may be considered for resolution will be the outstanding as on the date of invocation.” The debt, however, should not have been overdue by more than 30 days as on March 1, 2020.

Following the announcement of the one-time restructuring scheme, individual banks had released their own rules for restructuring. Some banks, including State Bank of India, said that only loans which existed on the bank’s books as on March 1, 2020, will be eligible for restructuring. “...only those accounts that existed in bank’s books on 01.03.2020, are eligible for consideration under this framework,” SBI had said in its FAQs.

Other clarifications issued by the RBI include:

• The restructuring scheme for retail borrowers will not include loans against property and in cases where loans are granted to an individual against mortgage of immovable properties and where a related business entity is co-borrower.
• Loans given to farmer households would be eligible for resolution under the resolution framework if they do not meet any other conditions for exclusions listed in the resolution framework. Most categories of farm credit had been excluded from the restructuring list.
• Prescribed financial thresholds for restructuring in real estate have to be applied at the level of the entity and not the project. The only exception to this is borrowers belonging to the real estate sector, which have both residential and commercial real estate business. Here, financial parameters may be applied at the project level.
• The resolution framework may be invoked for all exposures, including investment exposures via debt securities. “However, the resolution framework is without prejudice to all applicable guidelines issued by the relevant financial sector regulators,” the RBI said.

The restructuring exercise kicked in starting September. According to the RBI’s current rules, restructuring under the framework must be invoked not later than Dec. 31, 2020 and must be implemented within 90 days from the date of invocation.