RBI unveils loan recast 2.0

Mumbai In a bid to provide succour from scourge of Covid-19 pandemic, the Reserve Bank on Wednesday came out with Resolution Framework 2.0 under which individuals and small businesses having exposure up to Rs 25 crore can opt for loan restructuring if they had not availed the earlier scheme. In case of those who had availed the loan restructuring under the earlier scheme, RBI permitted the banks and lending institutions to modify the plans and increase the period of moratorium. "In respect of small businesses and msme restructured earlier, lending institutions are also being permitted as a one-time measure, to review the working capital sanctioned limits, based on a reassessment of the working capital cycle, margins, etc," said RBI Governor Shaktikanta Das while announcing steps to deal with the impact of the second wave of Covid-19 pandemic.

This is one-time loan time loan restructuring scheme under which the loan would remain standard despite recast and banks would not have to make additional provision in such cases. This is the second restructuring scheme announced by the central bank in less than one year time with the first unveiled in August last year when the first Covid-19 wave had battered Indian economy with contraction of 8 per cent during financial year ended on March 31, 2021.

The resurgence of Covid-19 pandemic in India in recent weeks and the associated containment measures adopted at local/regional levels have created new uncertainties and impacted the nascent economic revival that was taking shape, Das noted.

Noting that most vulnerable category of borrowers are individual borrowers, small businesses and micro, small and medium enterprises (MSMEs) in this environment, he said, borrowers who were classified as 'standard' as on March 31, 2021 would be eligible to be considered under Resolution Framework 2.0. Restructuring under the proposed framework may be invoked up to September 30, 2021, and would have to be implemented within 90 days after invocation. "In respect of small businesses and MSMEs restructured earlier, lending institutions are also being permitted as a one-time measure, to review the working capital sanctioned limits, based on a reassessment of the working capital cycle, margins, etc," he said.