Lenders given 90 extra days to resolve stressed asset cases due to COVID-19

The RBI on Friday gave lenders an extra 90-day time for resolving stressed asset cases because of the COVID-19 pandemic.

At present, lenders are given 210 days to resolve a stressed asset case and arerequired to hold an additional provision of 20 per cent if a resolution plan is not implemented within that timeframe.

Recognising the challenges to resolution of stressed assets in the current volatile environment, it has been decided that the period for resolution plan shall be extended by 90 days," Governor Shaktikanta Das said in a televised address.

In the current practice, lenders have a review period of 30 days after a default and are required to implement a resolution plan in respect of entities in default within 180 days.

In a circular, RBI elaborated that in respect of accounts which were within the review period as on March 1, the period from March 1 to May 31 will be excluded from the calculation of the 30-day timeline for the review period.

In cases where the review period is over, but the 180-day resolution period had not expired as on March 1, the timeline for resolution shall get extended by 90 days from the date on which the 180-day period was originally set to expire, it said.

Consequently, it will be only after the end of extended resolution period that a bank will have to start making additional provisions, it said.

It also asked the lenders to 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, and also 2019-20 and 2020-21.