Covid-19 Resolution Framework: A Cushion To Indebted Borrowers

A bank or financial institution that is lending financial assistance to a borrower faces the risk of being bankrupt on default of repayment by the borrower. Many laws were introduced by the legislature and various policies were also introduced by RBI to tackle such problems.  As a result of which the borrower was not given any concession if the default on his part was due to the reasons beyond his control. Therefore, Prudential Framework for resolution of Stressed Asset Direction 2019 was introduced by RBI vide its notification dated June 7, 2019¹. The said direction provides concession to the borrower who is unable to repay debts due to financial problems by way of downgrading of the asset in the bank's automated system except when there is a change in ownership and in those cases the asset will be retained or upgraded to Standard, subject to prescribed conditions.