'Only standard loan accounts as of March 1 can be recast'

The Reserve Bank of India (RBI) has clarified that loans which have remained standard without any defaults as of March 1, 2020, will be eligible for restructuring under the pandemic-related resolution framework issued in August.

In clarifications issued late last night to borrowers as well as lenders about the August 6 circular, RBI said a loan account that was due for more than 30 days as on March 1, 2020, but subsequently got regularised, will not be ineligible for resolution under the COVID-19 resolution framework.

This is because the restructuring framework is applicable only for eligible borrowers who were classified as standard as of March 1, 2020.

However, such accounts may still be resolved under the prudential framework dated June 7, 2019, the central bank said.

Similarly, the regulator said restructuring of under-implementation project loans involving deferment of date of commencement of operations (DCCO) are excluded from the scope of resolution framework and that such accounts will continue to be governed by the February 7, 2020, and the other relevant instructions as applicable to specific category of lending institutions.

Also, in case of multiple lenders to a single borrower whose resolution is undertaken, all lending institutions will have to enter into an inter-creditor agreement.

On whether loans of Rs 100 crore and above will require an independent credit evaluation by any one credit rating agency, the apex bank said, in case credit opinion is obtained from more than one rating agency, all such credit opinions must be RP4 rating or above. The clarification also said the new definition of micro, small and medium enterprises (MSMEs) effective June 26, will not impact their eligibility for resolution but will be based on the definition that existed as of March 1, 2020.