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No recast for accounts that cured 30-day default after March 1: RBI

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In case credit score opinion is obtained from multiple CRA, all such opinions should be RP4 or higher, the central financial institution mentioned.

Loan accounts that have been in default for over 30 days as on March 1 is not going to be eligible for restructuring below the Covid decision scheme even when they cleared their dues thereafter, the Reserve Bank of India (RBI) mentioned in a set of regularly requested questions (FAQs). Sectors for which no eligibility ratios have been laid out by the central financial institution will be capable of avail of recast in accordance with banks’ assessments, the FAQs mentioned. Also, the precise debt which may be thought-about for decision would be the excellent as on the date of invocation.

“Such accounts (which were more than 30 DPD on March 1, 2020, but subsequently got regularised through receipt of overdue) are ineligible for resolution under the Resolution Framework as the Resolution Framework is applicable only for eligible borrowers which were classified as standard, but not in default for more than 30 days as on March 1, 2020. However, such accounts may still be resolved under the Prudential Framework dated June 7, 2019,” the RBI mentioned.

Loans towards property (LAPs), availed for enterprise functions however are secured by immovable belongings, is not going to be handled as particular person loans and they are going to be eligible for decision below Part B of the framework. The similar applies to loans granted to people the place the property is within the title of a person and a associated firm or a non-individual entity has been taken as co-borrower on the mortgage construction to complement the revenue for compensation of mortgage.

For the aim of eligibility for decision below the framework, the definition of micro, small and medium enterprises (MSME) that might be relevant is the one which existed as on March 1, and never the revised one below the gazette notification dated June 26. Only such decision plans which obtain a credit score opinion of RP4 or higher for the residual debt from a credit standing company (CRA) shall be thought-about for implementation below the framework. In case credit score opinion is obtained from multiple CRA, all such opinions should be RP4 or higher, the central financial institution mentioned.

The decision framework is relevant in respect of all eligible debtors topic to the exclusions prescribed within the round dated August 6. “In respect of those sectors where the sector-specific thresholds have not been specified in the circular dated September 7, 2020, lending institutions shall make their own internal assessments regarding TOL (total outstanding liabilities)/ATNW (adjusted tangible net worth) and Total Debt/EBITDA (earnings before interest, taxes, depreciation, and amortisation),” the FAQs mentioned, including, “However, the current ratio and DSCR (debt service coverage ratio) in all cases shall be 1.0 and above, and ADSCR (average DSCR) shall be 1.2 and above.”

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