In view of the uncertainties created by the resurgence of the Covid-19 pandemic in India in the recent weeks, it has been decided to extend the Resolution Framework 2.0 – Resolution of Covid-19 related stress of Micro, Small and Medium Enterprises (MSMEs) facility for restructuring existing loans without a downgrade in the asset classification subject to the following conditions:
The resurgence of Covid-19 pandemic in India in the recent weeks and the consequent containment measures to check the spread of the pandemic may impact the recovery process and create new uncertainties. With the objective of alleviating the potential stress to individual borrowers and small businesses, a set of measures are being announced by RBI. These set of measures are broadly in line with the contours of the Resolution Framework – 1.0, with suitable modifications.
In an unscheduled address, the Governor said that the situation in the country has reversed from being on foothills of strong economic recovery to facing a fresh crisis.
The Reserve Bank of India (RBI) on May 5 announced several measures to protect small and medium businesses, individual borrowers from the adverse impact of the intense second wave of COVID-19 across the country.
It has also made provisions for banks to advance loans to businesses and restructure loans for enhancing liquidity in the system to help mitigate the crisis.
The RBI announced a Resolution Framework 2.0 for COVID-related stressed assets of individuals, small businesses and MSMEs and also expressed its resolve to do everything at its command to ‘save human lives and restore livelihoods through all means possible’.
Considering that the resurgence of COVID-19 pandemic in India has made individual borrowers, small businesses and MSMEs most vulnerable, the RBI has allowed borrowers i.e. individuals and small businesses and MSMEs having aggregate exposure of up to ₹25 crore, who have not availed restructuring under any of the earlier restructuring frameworks (including under the Resolution Framework 1.0 dated August 6, 2020), and who were classified as ‘Standard’ as on March 31, 2021, eligible to be considered under Resolution Framework 2.0.
RBI has issued FAQs on Resolution Framework for Covid-19 related stress. These FAQs will help in clarifying the various aspects announced for COVID19 related stress.