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ARTICLE · 10 AUGUST 2020

RBI Announces Resolution Window For Covid-19 Related Stress

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The Prudential Framework provides for recognising incipient stress in loan accounts and a principle-based resolution framework for addressing such defaults in a normal scenario.

IndiaFinance and Banking
Aastha Roy
Aastha Roy
Swaraj Singh Narula
Swaraj Singh Narula
Arhat Chhabra
Arhat Chhabra
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Introduction

On August 6, 2020, the Reserve Bank of India ("RBI") issued a circular on 'Resolution Framework for COVID-19 related Stress' ("Resolution Framework") providing for a resolution window under the existing RBI (Prudential Framework for Resolution of Stressed Assets) Directions 2019, dated June 7, 2019 ("Prudential Framework"), with a view to mitigate the financial stress faced by borrowers on account of the economic fallout of the COVID-19 pandemic.

The Prudential Framework provides for recognising incipient stress in loan accounts and a principle-based resolution framework for addressing such defaults in a normal scenario. However, any concession offered to a borrower under such a resolution framework leads to a downgrade in the asset classification of the borrower's account, except in case of change in ownership in the prescribed manner.

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