You are here: Home » Economy & Policy » News
Business Standard

RBI fields FaQs on loan recast, clears air over OTR, loan against property

Says outstanding debt on date of invocation will be eligible for restructuring under regulatory scheme for borrowers facing financial stress due to Covid-19

Topics
Reserve Bank of India | RBI | Loan against property

Abhijit Lele & Raghavendra Kamath  |  Mumbai 

loan
RBI said there are loan granted to individuals where the property is in name of individual

The (RBI), in a frequently asked questions (FAQs) for one-time restructuring (OTR), said outstanding debt on the date of invocation can be restructured under the regulatory scheme for borrowers facing financial stress due to the Covid-19 pandemic. With the FAQs, the addressed a volley of queries on operational issues.

The RBI’s circular on OTR on August 6 had stated that the reference date for the outstanding amount of debt that may be considered for resolution will be March 1, 2020.

Bankers said many changes occurred in about seven months, both for borrowers who opted for moratorium and those who did not avail of holiday (moratorium).

For example, in the business unit, working capital levels and amount of interest levied would be different now compared to March 2020.

This would change in the outstanding amounts. Hence, this tweaking was necessary. Banks have to invoke restructuring plans not later than December 31, 2020. In case of personal loans, the resolution plan must be implemented within 90 days from the date of invocation. However, the lending institutions should strive for early invocation. For corporate debt, the plan must be implemented within 180 days. March 1 was the date for establishing eligibility for recast and not so much to crystalise amounts that could be restructured, a senior public sector bank executive said.

In another query on loan against properties (LAP), the said LAP for business purposes with immovable property as security is not personal loan. It can be restructured only under the framework for non-individual borrowers facing stress due to Covid-19.

Anuj Puri, chairman of Anarock Property Consultants, said these qualifying criteria in the recast scheme will leave out quite a few real estate developers.

These developers have been flagged by lending institutions as having stressed loan or special mention accounts-1 accounts before March 1 this year.

The said there are loans granted to individuals where the property is in the name of the individual. But a related company/non-individual entity is taken as a co-borrower on the loan structure to supplement the income for repayment. Such advances would not be treated as personal loans. They would have to be dealt under a scheme for resolution of other exposures, the RBI said.

“This clarity will aid many small and medium businesses to become eligible for corporate loan restructuring/recasting. This recourse could provide the much-needed elbow room to suppliers of raw materials to the real estate sector to keep their businesses afloat and viable,” said Ramesh Nair, CEO and Country Head, JLL India.

Dear Reader,


Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Wed, October 14 2020. 16:25 IST
RECOMMENDED FOR YOU
.