Policy On Resolution Of Covid-19 Related Stress Of Micro, Small And Medium Enterprises (MSMEs)

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Policy on Resolution of Covid-19 related stress of Micro, Small and Medium Enterprises (MSMEs) (RBI Circular dt. 05/05/2021 with regard to Resolution Framework 2.0)

With the objective of alleviating the potential stress to individual borrowers and small businesses due to resurgence of Covid-19 pandemic in India, RBI has vide Circular dt. 05/05/2021 announced set of measures broadly in line with the contours of the Resolution Framework – 1.0, with suitable modifications. Our Bank has devised a policy in line with said RBI circulars in this regard to help the borrowers.

Criteria for Resolution Framework

As on 31/03/2021, the borrower should be classified as a MSME.
The borrowing entity should be GST-registered on the date of implementation of the restructuring. However, this condition will not apply to MSMEs that are exempt from GST-registration.
The aggregate exposure (Cash credit/OD facility, Loan facility) including non-fund based facilities, of all lending institutions to the borrower should not exceed ₹ 50 crore as on March 31, 2021.
The borrower’s account was a ‘standard asset’ as on 31/03/2021.
The borrower’s account was not restructured in terms of the RBI circulars, viz. :
The resolution plan should be finalised and implemented within 90 days from the date of invocation of the resolution process under this window. The resolution plan shall be deemed to be implemented only if all the following conditions are met.

DOR.No.BP.BC /4/ 21.04.048 /2020-21 dt. 6/08/2020;
DOR.No.BP.BC.34/21.04.048/2019-20 dt. 11/02/2020; or
DBR.No.BP.BC.18/21.04.048/2018-19 dated 01/01/2019.

The restructuring of the borrower account shall be invoked by September 30, 2021. The decisions on applications received by the Bank from their customers for invoking restructuring under this facility shall be communicated in writing to the applicant within 30 days of receipt of such applications.
The restructuring of the borrower account shall be implemented within 90 days from the date of invocation.
Upon implementation of the restructuring plan, Bank shall keep provision of 10 % of the residual debt of the borrower.
All other instructions specified in the RBI circular DOR.No.BP.BC/4/21.04.048/2020-21 dt. 06/08/2020 shall remain applicable.
In respect of restructuring plans implemented as above, asset classification of borrowers classified as standard may be retained as such. However, the accounts which may have slipped into NPA category between April 1, 2021 and date of implementation may be upgraded as ‘standard asset’, as on the date of implementation of the restructuring plan.
Bank should be satisfied that the resolution framework is necessitated / borrowers having stress on account of the economic fallout from Covid-19. Before extending the resolution framework to any borrower, Bank shall invite application from the borrower indicating the reasons for demanding resolution framework
Restructuring would normally involve modification of terms of the advances / securities, which may include, among others, alteration of repayment period / repayable amount / the amount of instalments/ review of working capital sanctioned limit and/or drawing power based on reassessment of working capital cycle etc.
Accounts provided relief as above shall be subject to subsequent supervisory review with regard to their justifiability on account of the economic fallout from Covid-19.