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

 Outstanding debt on the date of invocation will be eligible for restructuring under regulatory scheme for borrowers facing financial stress due to Covid-19 pandemic, the Reserve Bank of India has said.

The central bank addressed a volley of queries on operational issues in the Frequently Asked Questions (FAQs) section for one-time restructuring (OTR).

An RBI circular dated August 6 on OTR had stated that the reference date for the outstanding amount of debt that may be considered for resolution shall 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 case of business units, working capital levels and amount of interest levied would be different now and in March 2020. This would change the outstanding amounts; hence this tweaking was necessary. Banks have to invoke restructuring plans not later than December 31, 2020. In the 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, plan must be implemented within 180 days.

March 1 was the date was for establishing eligibility for recast but was not meant to crystalise amounts that could be restructured, a senior public sector bank executive said.

ALSO READ: Only standard loan accounts as of March 1 eligible for recast: RBI

In another query, RBI said Loan Against Properties (LAP) for business purpose with immovable property as security are not personal loans. They can be restructured only under framework for non-individual borrowers facing stress due to COVID19 pandemic.

Anuj Puri, Chairman - ANAROCK Property Consultants said these qualifying criteria in recast scheme will leave out quite a few real estate developers. These are developers who have been flagged by the lending institutions as stressed loan or Special Mention Accounts -1 accounts before 1st March 2020.

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