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Debt Resolution/ Restructuring Plan
Why is it in news?
- The central bank’s debt resolution plan for corporate and personal loans has been welcomed by analysts.
- Under the facility, lenders can go for a one-time restructuring of loans under stress due to the pandemic.
- The Reserve Bank of India (RBI) also provided a fresh lifeline to millions of stressed small businesses by extending the provision of restructuring of loans.
Details:
- Stressed MSME borrowers will be made eligible for restructuring their debt under the existing framework.
- However, the borrower's accounts with the lenders were classified as standard as on March 1, 2020.
Some key conditions stipulated by RBI for Small businesses:
- The aggregate exposure, including non-fund based facilities, of banks and NBFCs to the borrower does not exceed Rs 25 crore as on March 1, 2020.
- The restructuring of the borrower account is implemented by March 31, 2021.
- The borrowing entity is GST-registered on the date of implementation of the restructuring.
Significance:
- The move will help soften the impact on both banks as well as borrowers on the twin dimensions of controlling a rise in NPAs and supporting credit flow.
- The industry is encouraged by RBI’s decision to provide a window under the Prudential Framework to enable lenders to implement a resolution plan.
- It will help favourably towards the stability of financial sector to support growth and recovery in the economy.