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RBI issues revised circular on resolution of stressed loans

After the Supreme Court on April 2 struck down the February 12, 2019 circular of the Reserve Bank of India (RBI) that asked banks to initiate insolvency process against companies if there was even a day's delay in payment of dues, the central bank on Friday issued a revised circular on the resolution of stressed loans.
The new norms replaces all the earlier resolution plans such as the framework for revitalising distressed assets, corporate debt restructuring scheme, flexible structuring of existing long-term project loans, strategic debt restructuring scheme (SDR), change in ownership outside SDR, and scheme for sustainable structuring of stressed assets (S4A), and the joint lenders' forum with immediate effect.
Coming to one day default, the RBI has asked the banks to undertake a review of a borrower account within 30 days of default, "During this review period of thirty days, lenders may decide on the resolution strategy, including the nature of the resolution plan, the approach for implementation of the resolution plan, etc. The lenders may also choose to initiate legal proceedings for insolvency or recovery."
On the resolution plan, it has to be approved by 75 perccent of creditors by value, where earlier RBI had asked for 100 percent approval for a resolution plan to be approved, "The intercreditor agreement shall provide that any decision agreed by lenders representing 75 percent by value of total outstanding credit facilities (fund based as well non-fund based) and 60 percent of lenders by number shall be binding upon all the lenders."
"All lenders must put in place board-approved policies for resolution of stressed assets, including the timelines for resolution. Since default with any lender is a lagging indicator of financial stress faced by the borrower, it is expected that the lenders initiate the process of implementing a resolution plan even before a default," RBI said in its circular.
According to RBI, lenders must recognise stress in loan accounts, immediately on default, by classifying such assets as special mention accounts (SMA) as per the following categories.
For revolving credit facilities like cash credit, the SMA sub-categories will be as follows:
Further, RBI has demanded that lenders must submit a weekly report of instances of default by all borrowers (with aggregate exposure of Rs 50 million and above) by close of business on every Friday, or the preceding working day if Friday happens to be a holiday.
The new circular will be applicable to all borrowers with exposure of Rs 2,000 crore and above with immediate effect, borrowers with exposure between Rs 1,500– Rs 2,000 crore from January 1, 2020, and for borrowers with exposure under Rs 1,500 crore to be announced in due course.
30-day 'review period' allowed to firm strategy.Initiate resolution proceedings one-day after default.
NBFCs, SFBs included in the new circular.NBFCs excluded from guidelines.
Condition for upgrade:Only if a/c remains standard from date of implementation of RP until 10 percent of the principal debt is repaid.Condition for upgrade:Only if a/c remains standard from date of implementation of RP until 20 percent of the principal debt is repaid.
Banks to implement RP under the inter-creditor agreement.The inter-creditor agreement not part of February 12 circular. 
IBC not mandatory.IBC mandatory after 180-day period.
Voting Threshold:- 75 percent by the value of outstanding debt.- 60 percent by a number of lenders.Voting Threshold:Unanimous approval.
Addl provision after 180 day-period, reversal allowed under IBC.No additional provision.