Mumbai: The Reserve Bank of India (RBI) on Wednesday allowed banks to extend relief measures to borrowers affected by natural calamities without waiting for formal requests, and deferred the implementation of its resolution framework by a quarter to July 1.
The relaxation follows stakeholder feedback and amid rising weather-related disruptions impacting agriculture, infrastructure and household incomes. The norms, originally slated for April 1 and first proposed in January, require lenders to incorporate resolution plans into their credit policies.
"A bank need not wait for receipt of a formal request from a borrower and may decide to suo motu implement a resolution plan for the impacted borrowers," the RBI said.
Relief measures may include rescheduling of payments, moratoriums, conversion of interest dues into a separate credit facility, or additional financing. Borrowers will have an opt-out window of up to 135 days from the date of disaster declaration.
"The resolution plan may also include proposal for sanction of additional finance to address the financial stress of the borrower, subject to due assessment of the viability prospects of the borrower," RBI said.
However, eligibility is restricted to standard accounts not overdue by more than 30 days at the time of the calamity. Such accounts can retain their standard classification upon resolution, and those slipping into NPA between the calamity and implementation may be upgraded to standard. The central bank has retained a 5% additional provisioning requirement and expanded the definition of natural calamities to include events recognised under the State Disaster Response Fund and National Disaster Response Fund.
However, accounts already restructured under existing norms will continue to be governed by the current framework unless a fresh resolution plan is invoked. "To avoid any disruption, it is proposed to apply the framework prospectively," the RBI said.
Accounts where resolution plans have been implemented under the current framework would continue to be guided by the extant framework, unless a fresh resolution plan is used.
The relaxation follows stakeholder feedback and amid rising weather-related disruptions impacting agriculture, infrastructure and household incomes. The norms, originally slated for April 1 and first proposed in January, require lenders to incorporate resolution plans into their credit policies.
"A bank need not wait for receipt of a formal request from a borrower and may decide to suo motu implement a resolution plan for the impacted borrowers," the RBI said.
Relief measures may include rescheduling of payments, moratoriums, conversion of interest dues into a separate credit facility, or additional financing. Borrowers will have an opt-out window of up to 135 days from the date of disaster declaration.
"The resolution plan may also include proposal for sanction of additional finance to address the financial stress of the borrower, subject to due assessment of the viability prospects of the borrower," RBI said.
However, eligibility is restricted to standard accounts not overdue by more than 30 days at the time of the calamity. Such accounts can retain their standard classification upon resolution, and those slipping into NPA between the calamity and implementation may be upgraded to standard. The central bank has retained a 5% additional provisioning requirement and expanded the definition of natural calamities to include events recognised under the State Disaster Response Fund and National Disaster Response Fund.
However, accounts already restructured under existing norms will continue to be governed by the current framework unless a fresh resolution plan is invoked. "To avoid any disruption, it is proposed to apply the framework prospectively," the RBI said.
Accounts where resolution plans have been implemented under the current framework would continue to be guided by the extant framework, unless a fresh resolution plan is used.
