RBI moots new resolution plan for Corona-hit personal loan borrowers
The Reserve Bank of India (RBI) moots a separate resolution plan to deal with personal loan borrowers facing financial stress due to Covid-19 pandemic.
According to the outlines of the framework, resolution mechanism under the framework may include rescheduling of payments, conversion of any interest accrued, or to be accrued, into another credit facility, and granting of moratorium, based on an assessment of income streams of the borrower, subject to a maximum of two years. The implementation of the resolution framework thus means the overall tenure of the loan may also get modified commensurately.
The moratorium period, if granted, will come into force immediately upon implementation of the resolution plan.
Only those borrowers’ will be eligible for the resolution under the framework, whose accounts continue to be classified as Standard till the date of invocation of resolution under this framework. For this purpose, the date of invocation should be the date on which both the borrower and lending institution have agreed to proceed with a resolution plan under this framework.
The resolution under the framework could be invoked by December 31, 2020, and the same must be implemented within 90 days from the date of invocation. The banks and other lending institutions can also strive for early implementation.
The resolution plan, however, will be implemented only after all related documentation, including execution of necessary agreements between lending institutions and borrower and collaterals provided, are completed by the lenders concerned, the changes in the terms of conditions of the loans get duly reflected in the books of the lending institutions, and borrower is not in default with the lending institution as per the revised terms.
