These clarifications were issued by the central bank in a series of frequently asked questions (FAQs) on the Covid stress resolution framework announced last month. Regarding real estate, the RBI said: “Only for borrowers belonging to the real estate sector and having both residential and commercial real estate activities, prescribed thresholds for financial parameters can be applied at the project level.”
The RBI also cleared up the confusion as to whether only this ready which was pending as of March 1, 2020 is available for resolution. He said the March 1 deadline is to determine eligibility, while the actual loan that can be considered for resolution will be the one that is outstanding on the date the resolution framework is invoked.
This is a very important development as many real estate projects were stuck at the last stage due to a lack of funds due to a default at the company level. As a result of this default, lenders have been unable to provide funds for projects, although it is in their financial interest to ensure completion.
In its clarification, the RBI said that a fundamental requirement of its lending requirements restructuring, published in June 2019, was that there should be a creditor agreement between all lenders. He added that this framework gives banks enough flexibility to restructure loans on a project basis. This is because the projects are considered separate legal entities and therefore there is no barrier to creating separate escrow accounts.
Regarding micro, small and medium enterprises (MSMEs), the RBI said that although the government changed its definition on June 26, 2020 for the purposes of resolution eligibility, the definition of MSME that would apply is the one that existed. in March. 1, 2020. Another clarification from the RBI is that for borrowers who have taken out loans against movable property or an individual taken as a co-borrower to supplement the income of the business, the loan would not be considered a personal loan. .