Borrowers only need ask lenders to invoke Resolution Framework

NEW DELHI: Borrower s seeking the resolution of their bad debt under the Covid-19 stress relief scheme as suggested by the KV Kamath committee, are required to merely submit a request by December 31 to the lending institution if they require the invocation of the resolution process, clarified the Reserve Bank of India on Saturday. The central bank added that borrowers are not mandated to submit any resolution plan of any form at the time of request for invocation.

“The Resolution Framework does not require any resolution plan in any form to be submitted to the lending institutions at the time of request for invocation,” the central bank said in an update of its frequently asked question (FAQ) on the Resolution Framework for Covid-19 related stress. “Borrowers are required to submit a request.Thereafter, the lending institutions will take an in-principle decision - as per their Board approved policy - on invoking the Resolution Framework.

After such invocation, the specific contours of the resolution plan to be implemented may be decided by the lenders, in consultation with the borrower,” RBI added in its compilation of frequently asked queries. For personal loans, the resolution plan is to be implemented within 90 days from the date of invocation, while for all other loans the prescribed period is 180 days.

The central bank further clarified that the Re s o lut i o n Framework may also be invoked for resolution of all exposures of lending institutions to eligible borrowers, including investment exposures that are credit substitutes such as corporate bonds, commercial papers etc. “However, the Resolution Framework is without prejudice to all applicable guidelines issued by the relevant financial sector regulators and other Departments of the RBI in respect of any particular exposure,” the central bank pointed out.