Debt | Equity | Advisory | Training | TEV |

A Summary of RBI’s One Time Restructuring Scheme for Business Loans

Dated August 6, 2020-(Scheme)
Applicable for following Lending Institutions (LIs)

Cooperative
Banks

Cooperative Banks- Primary

(Urban)/ State and District Central NBFC

All Commercial
Banks AIFI NBFCs including
HFCs

2
All India Financial Institutions
Some Important Dates

Reference March 1, 2020

Date

The Date on which the Borrower and the Lending Institution(s) (LIs) agree to
Invocation proceed with the resolution plan under the Scheme. The Invocation date
Date
should be on or before December 31, 2020.

i. December 31, 2020-if the Invocation does not happen by this date
ii. 180 days from the Invocation Date- if the Resolution Plan is not
Expiry Date
implemented
iii. 30 days from Invocation Date -if ICA with requisite participation is not
executed among the LIs.

3
Key Highlights of the Scheme
Enables the lenders for resolution of eligible accounts, while continuation
of “standard” classification/upgradation

Available only to borrowers having stress caused by COVID 19

Requires Lending Institutions to have Board approved Policies for due

diligence & eligibility

 Mandatory Inter Creditor Agreement (for Multiple LIs) -also incentivises

by way of low provisioning for ICA signatories

4
Key Highlights of the Scheme -Contd.
Expert Committee of RBI to recommend financial parameters including sector
specific benchmarks, as notified by RBI-to be considered in the RP

Review of RP by Expert Committee and credit evaluation by rating agencies

Permits Additional funding including interim funding after Invocation

Escrow Manager to have enforcement powers for timely disbursement of

credit facilities by LIs.

5
Ineligible Borrowers/ Exposures
Micro, Small and Medium Enterprises (MSME) having aggregate exposure to
LIs of <= INR 25 crore
Farm Credit
Loans to Primary Agricultural Credit Societies, Farmers’ Service Societies and
large Sized Adivasi Multipurpose Societies for on-lending to agriculture;
Exposures to Financial Service Providers (as defined under section 3(17) of
IBC 2016)
Exposure to Central/State Govt., Local Govt. bodies and body corporates
established by an Act of Parliament/State Legislature
Exposure to HFCs – subject to certain conditions.

6
Resolution Process
 Account classified as Standard and default not exceeding 30 days as on March 1, 2020 with any LI
Eligibility  Accounts should continue to be Standard as on Invocation Date

 Invocation happens when the LI(s) and the Borrower agree for proceeding with the Resolution Plan
(RP) under the Scheme, however:
Invocation  in case of Multiple LIs, if 75% by value of outstanding credit facilities and 60% by the number
should agree for proceeding with the RP;

 LIs to sign the ICA within 30 days of Invocation Date (Minimum 75% by value of Outstanding credit
Inter Creditor facilities and 60% by number to make it valid);
 Lenders other than LIs permitted to sign the ICA- but shall be bound by its terms
Agreement (ICA)  ICA to lay down recourse available to disputing signatory(ies) & Information sharing mechanism.

 The Resolution Plan for the Accounts having exposure >=INR 1500 crore (as on Invocation Date) to
Review and be vetted by the Expert Committee set up by RBI;
 The Resolution Plan for the Accounts having exposure of >= INR 100 crore to have Independent
Implementation Credit Evaluation by one Credit Rating Agency.
7
General Guidelines
 Escrow Mechanism for Accounts with multiple LIs with one of the LIs for routing all receipts,
Escrow Account repayments and disbursements
Mechanism  Escrow Manager to have enforcement mechanism for timely servicing of Disbursement
Obligations of the LIs

 RP can have any action as given in Paragraph 13 of June 7, 2019 Prudential Framework by RBI
except “Compromise Settlement”
Resolution Plan-  May include sanction of additional credit facilities;
Features  LIs may allow Moratorium and/or extension of residual tenure (aggregate extension not to exceed
two years)
 To consider the Financial Parameters and the sector specific range thereof as notified by RBI.
General Guidelines –contd.
Conversion of  RP may provide conversion of a portion of debt into equity or other marketable non-convertible
debt securities –however the amortization schedule and coupon carried by such debt securities to
Exposures to be similar to the terms of the debt held by LIs post implementation of RP.
 Debt converted to Equity to be valued as per Paragraphs 19(c) & 19(d) of Prudential Framework;
other Securities  Debt converted to other debt securities to be collectively valued at INR 1

 Additional Finance to meet interim liquidity to be classified as “Standard” till implementation of

Asset RP;
 “Standard” classification to be retained or in case the account slips to NPA between Invocation and
Classification Implementation, the account to be upgraded to “Standard”, on implementation of RP which
adheres to the provisions of Scheme.

9
Post Implementation Monitoring
 A period of 30 days commencing from the date of default, by the Borrower, during the Monitoring
Review Period Period, with any of the Signatories of ICA

 Starting from the date of implementation of RP

Monitoring  Later of (i) one year from the date of commencement of repayment/interest (whichever is later) of
Period the credit facility with longest moratorium period and (ii) by when the repayment of at least 10% of
the residual debt has happened.

Consequences  In case of default with any signatory to ICA, at the end of Review Period- account would be
classified as NPA with all the LIs (including non-signatories) from earlier of (i) date of
of Default implementation of RP and (ii) date of classification of NPA before implementation of RP.

Fresh  Fresh restructuring on failure of the RP implementation under the Scheme can be taken up under
Prudential Framework of June 7, 2019.
Restructuring
10
About Resurgent India
About Resurgent Group & Key Highlights
Resurgent India is growing Investment Bank, Closed Advisory and
350+ successful
SEBI registered Category I Merchant Bank Fund Raising Transaction
transactions delivered
offering services like Special Situation of more than 15000 Cr
across various sectors
last year
Advisory including Restructuring and
Distressed Asset funding, Mergers &
Acquisitions, Private Equity, Debt Solutions,
Structured Finance, Capital Market
Solutions, Valuations, TEV Studies and Pan-Indian presence
Enterprise Risk and Tax Advisory Services. 150+ research papers
across Gurgaon,
published across
Mumbai, Kolkata,
industries as knowledge
Our team members act as product and Bengaluru, Hyderabad,
based firm
industry specialists, with deep domain Jaipur, Chennai
knowledge and research driven approach.

We have a full-service domestic Indian

platform which offers scale and depth of Started Fintech Venture -
operations across business lines, global Team of 150+ SCOREME whose
governance standards, and best-in-class experienced human product is running in
product sophistication. force more than 25 Financial
Institutions

12
 Techno Economic Agency for Specialized
Debt Syndication
Viability Studies Monitoring (ASM)

Our Group Services

Special Situation
Advisory incl.
Transaction / Govt Business Valuation &
Restructuring and
Advisory Assets Valuation
Insolvency Advisory (IBC)
Services

Training Services M&A and Private Equity Wealth Management

13
Our Approach to Restructuring Advisory
Understanding the business model
Detailed analysis of cash flow mismatch
Understanding and analysis of historical financial position and results
Understanding the Industry Scenario
Preparation of detailed Resolution Plan(RP)
Representation before the LIs for the implementation of the RP
Coordination & representation with external agencies like Credit Rating Agencies,
Investment Committees, Forensic Auditors, Techno Economic Viability Study
agencies, valuers, legal counsels etc.
End to end support services till implementation of Resolution Plan.

14
Frequently Asked Questions
Frequently Asked Questions
Query No 1
Who is Eligible under the Scheme?
Any business entity having loan from eligible lenders which is not in default for
more than 30 days as on March 1, 2020 and continues to be classified as Standard
till Invocation Date. However, in case of MSME borrowers, the aggregate exposure
should exceed INR 25 crore.
Query No. 2
Whether the Scheme applicable to non-corporate borrowers?
Yes, the Scheme is applicable to all eligible borrowers like Individual, Sole
Proprietorship, Partnership, LLP, Society, Trust, Company etc.
16
Frequently Asked Questions-contd.
Query no 3
Whether the Scheme permits disbursement of additional credit facilities?
Yes, the LIs are permitted to sanction additional credit facilities to the borrowers
as part of Resolution Plan. The LIs are also permitted to sanction interim credit
facilities after Invocation Date.
Query No. 4.
By Which date the Scheme can be Invoked?
The Scheme can be invoked any time upto December 31, 2020.
Query No. 5.
Whether the account would be downgraded on implementation of Resolution
Plan?
No, the account will not be downgraded upon implementation of the Resolution
Plan. 17
Frequently Asked Questions-contd.
Query No. 6.
What would happen if the account slips to NPA during the period between
Invocation and Implementation?
Upon the implementation of Resolution Plan the account, if downgraded
between the Invocation and Implementation, shall be upgraded to Standard.
Query No.7.
Does the Scheme permits change in repayment terms of existing debt?
Yes, the Scheme permits change in Repayment Schedule.
Query No. 8.
Can new lenders takeover the loans under the Scheme?
No, the Scheme permits implementation of Resolution Plan only with existing
Lenders.
18
Frequently Asked Questions-contd.
Query No. 9.
Whether the Scheme allows moratorium?
Yes, the Scheme allows the LIs to permit moratorium. However, any additional
facilities on account of any irregularity, needs to be repaid within 2 years
including moratorium.
Query No. 10.
What is period of extension for repayment is permitted under the Scheme?
Total period of extension in the repayment period over the existing repayment
period, including moratorium if any, can not exceed two years. eg. For an
existing loan having last repayment date as Feb. 29, 2020, the revised
repayment including moratorium if any cannot be beyond Feb 28, 2022.
19
Frequently Asked Questions-contd.
Query No. 11.
What is the significance of Monitoring Period?
Any default during the monitoring period has to be rectified within 30 days;
failure will result in classification of account as NPA. However, once the
monitoring period is over, any delinquency in servicing the debt shall be
treated as per other applicable guidelines.
Query No. 12.
What is the time available for implementation of Resolution Plan after
Invocation?
The Scheme permits 180 days for implementation after Invocation Date.

20
Frequently Asked Questions-contd.
Query No. 13.
How the viability of a Resolution Plan will be established?
Based on the recommendations of the Expert Committee headed by Sh. K. V.
Kamath, RBI will notify the financial parameters and sector specific desirable
ranges of such parameters to be factored in the Resolution Plan. Further, the
Resolution Plan with exposure of INR 100 crore or more will require
Independent Credit Evaluation by a Credit Rating Agency. Moreover, where the
exposure is INR 1500 crore or above, the Resolution Plans will require vetting by
the Expert Committee.
Query No. 14.
Whether the Resolution Plan requires Credit Rating?
For exposures of INR 100 crore or more, the Resolution Plan requires to have an
Independent Credit Evaluation from a credit rating agency.
21
Frequently Asked Questions-contd.
Query No. 15.
Any sector excluded under the Scheme?
The Scheme is sector agnostic and all the eligible borrowers can avail the
restructuring under the Scheme.
Query No. 16.
Whether the Scheme Covers personal loans and loans availed by MSME?
The Scheme covers the personal loans and other business loans. MSMEs with
exposure upto INR 25 crore are not covered in the Scheme and are dealt with
under separate guidelines. However, this document does not cover the
Personal Loans and MSME loans upto INR 25 crore.

22
Disclaimer
This document provides the readers a bird’s eye view of the guidelines issued by RBI dated August 6,
2020 on “ Resolution Framework for COVID-19 –related stress” (the Scheme) with regard to other than
personal loans.
This document does not purport to replace or interpret the provisions of the Scheme. The contents
provided in the document treats the subject covered, in a condensed form and as a general guide. The
contents should not be relied upon for taking any decision. The recipients of this document should make
their own independent evaluation or interpretations or should consult their advisors and should not rely
on the contents of this document. No representation or warranty, expressed or implied is made about
the completeness and accuracy of the information contained in this document and the Resurgent India
Limited, any of its associates, employees, officers, directors, advisors or agents shall have no liability for
any statement, opinion or information or any matter arising out of/contained in/derived from or for any
omissions from this document or for any liability for any loss arising from the use of any information
contained in this document.
 Connect with us at:
info@resurgentindia.com
+91-124-4754550 Debt | Equity | Advisory | Training | TEV |

RESURGENT INDIA LTD.

Visit us at CIN- U74140WB2005PLC106619
SEBI Registered CAT-I Merchant Bank, Regn. No. INM000012144
www.resurgentindia.com ISO 9001:2015 Company