FAQ on Resolution Framework for COVID-19-Related Stress
Background - Resolution Framework
The economic fallout on account of the Covid-19 pandemic has led to significant financial stress for borrowers across the board. Thus, with the intent to facilitate revival of real sector activities and mitigate the impact on the ultimate borrowers, RBI vide their circular no. RBI /2020-21/16 DOR. No. BP. BC / 3/21.04.048/2020-21 dated August 06, 2020 (“Resolution Framework”) read with circular number RBI/2020-21/34 DOR. No. BP.BC/13/21.04.048/2020-21 dated September 07, 2020 (“Resolution Framework – Financial Parameters”) has decided to provide a window under the Prudential Framework for Resolution of Stressed Assets) Directions 2019, dated June 7, 2019 (“Prudential Framework”) to enable the lenders to implement a resolution plan only to borrowers having stress on account of Covid19.
EFIL is currently engaged in the business of granting loans against securities (LAS), LAS - Margin Trade Financing, ESOP Funding, Special Situation Funding including (IPO / Bond Financing) and Unsecured Loans.
The framework shall be applicable to eligible borrowers – corporate persons or otherwise – subject to the conditions specified in the Circular.
Due to the economic fallout on account of the Covid-19 pandemic leading to significant financial stress for customers across the board, the Resolution plan is being offered.
It is offered to the affected customers having good repayment track record and who are eligible basis criteria defined
The resolution plan can be availed by eligible corporates without change in ownership and personal loans, subject to specified conditions.
The resolution plan is offered to eligible customers subject to acceptance & adherence of the terms and conditions/documentation governing the same.
1. What if the purpose of resolution plan?
Purpose of the resolution plan is to assist customers in reducing the resultant stress which may potentially impact the long-term viability of the business due to the debt burden becoming disproportionate relative to their cash flow generation abilities.
2. In what form assistance will be provided to me?
The assistance to the customers under Resolution plan is by deferring the interest payment and/or extending tenure of loan.
The resolution plans may include rescheduling of payments, conversion of interest accrued / to be accrued into another credit facility, or, granting of moratorium, based on an assessment of income streams of the borrower, subject to a maximum of 2 (two) years. Correspondingly, the overall tenor of the loan may also get modified commensurately. The moratorium period, if granted, shall come into force immediately upon implementation of the resolution plan.
3. What would be the maximum tenure for Moratorium under Resolution Plan?
As mentioned in previous question, maximum tenure for moratorium under this resolution plan will be upto 24 months at sole discretion of the company.
4. Am I eligible to seek restructuring of my loan with the EFIL
For applying loan restructuring under COVID 19 resolution framework, one should meet following basic criterion-
- Only those loan accounts which are on the Company’s Loan book as on March 1st 2020 will be eligible.
- Loan accounts classified as 'standard', but not in default for more than 30 (thirty) days as on March 1, 2020.
- Further, the account continue to be classified as Standard till the date of invocation of resolution under this framework. For this purpose, the date of invocation shall be the date on which both the borrower and the Company have agreed to proceed with a resolution plan under this framework.
- The borrower has to be impacted financially by the COVID-19 pandemic in the form of reduction/ loss of income or cash flows.
- The reduction of income and its financial impact on the customer will be reviewed by the Company basis the documents / information provided which does show the drop in cash flow due to the COVID-19 impact.
- The Company will assess the viability of the customer to pay the restructured dues basis the documents provided, before granting the restructuring. Apart from the viability calculations, the repayment track record of the customer, and the responses given by the customer while availing moratorium earlier will also be factored in the restructuring decision.
5. If my loan is already in NPA as of March 1, 2020 will the Resolution Plan be applicable to me?
No. The Resolution Plan will only be available for loans which are classified as “Standard” and not overdue for more than 30 days as on March 1, 2020.
6. I have multiple loans with EFIL. Should I apply for loan restructuring only once or do I have to apply separately for each and every loan?
If you have multiple loans, you will need to raise a request for each loan you need to be restructured separately.
7. I had not taken the moratorium between March – August, 2020. Can I apply for the loan restructuring scheme now?
You can apply for loan restructuring. However we will assess your application based on the criteria mentioned above as well as other factors such as credit worthiness etc. and then let you know if your loan restructuring request may be processed further.
8. Do I have to apply for loan restructuring option, or will my loan be automatically restructured since I had already applied for Loan Moratorium previously?
Customers who had have availed Loan Moratorium between March - August 2020, will also have to apply in case they wish to avail this facility.
9. My loan was taken along with a co-borrower/s. Will all the co-borrowers of the original Loan agreement be required to sign the revised restructuring agreement?
As per regulatory and legal requirements, all borrowers/co-borrowers of the original loan need to agree and sign on any changes in the loan structure including the restructuring agreement.
10. Will there be any processing fees or charges if I restructure my loan?
Our Company may levy a fee if you choose to get your loan restructured.
11. Can I apply multiple times for same facility?
No. You can apply for restructuring only once.
12. Can I opt-out from Resolution Plan once applied for?
No. Once you have opted for Restructuring Plan implementation for your loans basis the offers opted, you may not be able to opt-out of the same.
13. Will EFIL seek any documents or information from me?
a) If you are salaried person, lender may ask you to provide following document(s)-
- Salary slips for the month of Feb 2020 and latest salary slip for last 2 months
Copy of intimation from employer organization for salary reduction/deferment/job-separation as the case may be.
- Plan how the person will repay the dues at the end of restructuring period
- Bank account statements of the account where salary is credited in case of salaried employees from Feb 2020 to date
b) If you are not a salaried person, lender may ask you to provide following document(s)-
- Current / CC account bank statement for 1st Oct 2019 till 30th Sep 2020
- Income tax returns For FY-19 & FY-20 ( if filed)
- Profit and loss statement / Balance sheet for the last 2 years
- Declaration by self-employed professionals/ businessmen declaring that their business is affected by Covid-19.
14. Can EFIL may seek any additional documents or information from me apart from above?
Yes, basis verification of documents provided and your application, lender may seek additional documents or information from you.
15. Where should I apply in case I wish to seek restructuring my loan due to Covid-19?
Customers can avail the facility through mail to LAS.firstname.lastname@example.org.
16. What is the last date for applying for restructuring for COVID-19
The last date to apply for re-structuring would be 20th December 2020
17. How would I know if my application is accepted?
Company will send you intimation on your registered e-mail ID, alongwith required document in case your application is accepted or your RM will connect with you for documentation
18. What is timeframe within which resolution will be invoked?
Resolution under this framework may be invoked not later than December 31, 2020 and must be implemented within 90 days from the date of invocation.
19. What will be impact of restructuring on Credit Reporting?
The credit reporting where the resolution plan is implemented shall reflect the “restructured” status of the account if the resolution plan involves renegotiations that would be classified as restructuring under the Prudential Framework.
20. At the moment my income has not been impacted, but it may happen in the future. Can I apply for loan restructuring?
You can apply for loan restructuring. However we will assess your application based on the criteria mentioned above as well as other factors such as credit worthiness etc. and then let you know if your loan restructuring request meets the requirement of Our Policy.
For more information you can write us at LAS.email@example.com.