Money & Banking

RBI allows rescheduling of termloans and working capital facilities

| Updated on March 27, 2020

Our Bureau

Mumbai, March 27

The Reserve Bank of India (RBI), on Friday, unveiled measures such as temporary rescheduling of payments of term loans and working capital facilities to mitigate the burden of debt servicing brought about by disruptions on account of Covod-19 pandemic and to ensure the continuity of viable businesses.

In respect of all term loans, all commercial banks (including regional rural banks, small finance banks and local area banks, co-operative banks, all-India financial institutions and NBFCs (including housing finance companies) have been permitted to grant a moratorium of three months on payment of all instalments falling due between March 1, 2020 and May 31, 2020.

The RBI said term loans will include agricultural term loans, retail and crop loans. Instalments will include payments related to principal and/or interest components; bullet repayments; equated monthly instalments (EMIs); and credit card dues.

The RBI said the repayment schedule for such loans and also the residual tenor will be shifted across the board by three months after the moratorium period. Interest will continue to accrue on the outstanding portion of the term loans during the moratorium period.

Deferment of interest

In respect of working capital facilities sanctioned in the form of cash credit (CC)/overdraft (OD), lending institutions have permitted to defer the recovery of interest applied in respect of all such facilities during the period between March 1 and May 31. The accumulated accrued interest will be recovered immediately after the completion of this period.

In respect of working capital facilities sanctioned in the form of CC/OD to borrowers facing stress on account of the economic fallout of the pandemic, lending institutions may recalculate the ‘drawing power’ by reducing the margins and/or by reassessing the working capital cycle. This relief will be available in respect of all such changes up to May 31,and will be contingent on the lending institutions satisfying themselves that the same is necessitated on account of the economic fallout from Covid-19.

Further, accounts provided relief under these instructions will be subject to subsequent supervisory review with regard to their justifiability on account of the economic fallout from Covid-19. The rescheduling of payments, including interest, will not qualify as a default for the purposes of supervisory reporting and reporting to Credit Information Companies(CICs) by the lending institutions.

CICs need to ensure that the action taken by lending institutions, pursuant to the above announcements, do not adversely impact the credit history of beneficiaries.

Published on March 27, 2020

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