In a major relief to the borrowers, the Reserve Bank of India (RBI) on Friday extended the repayment period of the loan by three months to August to help overcome the income disruption due to the COVID-19 crisis. In March, the central bank imposed a three-month moratorium on repayment of all term loans between March 1, 2020 and May 31, 2020. “In view of the expansion and continued disruptions of lockdown due to COVID-19. Reserve Bank of India Governor Shaktikanta Das said that lending institutions have been allowed to extend the term loan installments from June 1 to August 31, 2020.
Accordingly, the repayment schedule and all subsequent due dates, such as tenure for such loans, can be transferred to the board for the next three months, he said.
As a result of this moratorium, the Equated Monthly Installment (EMI) payment of the loans taken will not be deducted from their bank accounts, providing a lot of liquidity to the borrowers, whose income has been constrained by the lockdown until May 31.
The loan EMI payment will resume only after the moratorium time period ends on 31 August.
For borrowers who will avail the moratorium, the EMI will be extended with interest applicable to the outstanding principal amount during the unpaid period.
On 27 March, the RBI allowed all commercial banks, including regional rural banks, and all-India financial institutions, and non-bank financial companies, including housing finance companies and microfinance institutions, to pay installments in respect of all tenures Allow three months’ deferment. The loan is due on March 1.
In addition, the central bank instructed lending institutions to exclude the entire moratorium period from March 1 to August 31 from calculating the March 30 review period or the 180-day resolution period due to the COVID-19 crisis.
Under the prudential framework, lending institutions are required to keep an additional provision of 20 percent in case of large accounts under default if a resolution plan is not implemented within 210 days from the date of such default.
“Given the continuing challenges to the resolution of stressed assets, lending institutions are allowed to exclude the entire moratorium / moratorium period from August 1 to August 31 from the calculation of the March 30 review period or the 180-day resolution period, if the review / Resolution did not expire till March 1, 2020, ”he said.
With regard to working capital facilities sanctioned as cash loans / overdrafts, he said that lending institutions are being allowed to extend one and three months deferment, except June 27 to August 31, payments were allowed on March 27 There is interest in respect of all such facilities outstanding on 1 March.
The governor said, the lenders are allowed to convert the accumulated interest on working capital facilities up to 31 August into funded interest period loans, which will not be repayable later in the current financial year.
The central bank has also decided to increase the bank’s exposure to a group of counterparts linked to 30 percent of the bank’s eligible capital base to facilitate greater fund flow to corporates from the banking sector.
Under the existing guidelines on the Large Exposure Framework, exposure to a group of bank-linked counterparts will not exceed 25 percent of the bank’s eligible capital base at all times.
He said, uncertainty is increasing due to COVID-19 epidemic, debt market and other capital market sectors. As a result, many corporates are finding it difficult to raise funds from the capital market and rely mainly on funding from banks.
“With a view to facilitating the flow of resources to corporates, it has been decided, as a one-time measure, to increase the risk of a bank to a group of qualified counterparts from 25 percent to 30 percent.” Bank’s capital base. The increased limit will be applicable till 30 June 2021.
Emphasizing that since a special moratorium is being provided to enable borrowers on the disruptions of COVID-19, Das said, due to the financial hardship of the borrowers, the terms and conditions of the loan agreements Changes will not be considered as, and consequently, not result in, asset classification downgrades.
In relation to all accounts for which lending entities decide to grant a moratorium, and which were the norm on March 1, the 90-day non-performing asset (NPA) criteria will also exclude the extended moratorium period.
Consequently, there will be an asset classification pause for all such accounts during the period from 1 March to 31 August. Subsequently, normal aging criteria will apply.