The Reserve Bank of India (RBI) has given a temporary breather to lenders on the Review Period as well as timeline for resolution of stressed assets under its Covid-19 regulatory package.
In respect of accounts, which were within the Review Period as on March 1, 2020, the RBI said the period from March 1, 2020 to May 31, 2020 will be excluded from the calculation of the 30-day timeline for the Review Period.
In respect of all such accounts, the residual Review Period will resume from June 1, 2020, upon expiry of which the lenders will have the usual 180 days for resolution.
As per RBI’s “Prudential Framework for Resolution of Stressed Assets”, once a borrower is reported to be in default by any of the lenders, they should undertake a prima facie review of the borrower account within 30 days from such default (“Review Period”).
During this Review Period, lenders may decide on the resolution strategy, including the nature of the Resolution Plan (RP), the approach for implementation of the RP, etc. The lenders may also choose to initiate legal proceedings for insolvency or recovery.
In respect of accounts where the Review Period was over, but the 180-day resolution period had not expired as on March 1, 2020, the RBI said the timeline for resolution will get extended by 90 days from the date on which the 180-day period was originally set to expire.
Consequently, the requirement of making additional provisions (20 per cent additional provision to be made as a percentage of total outstanding if RP is not implemented within the timeline) specified as per the Prudential Framework will be triggered as and when the extended resolution period, as stated above, expires.
The RBI said the lending institutions should make relevant disclosures in respect of accounts where the resolution period was extended in the ‘Notes to Accounts’ while preparing their financial statements for the half year ending September 30, 2020 as well as for FY20 and FY21.
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