LOANTAP GROUP POLICY ON RESTRUCTURING OF LOANS- COVID-19
Resolution Framework – 2.0: Resolution of Covid-19 related stress of Individuals and Small Businesses
A. Background and objective
The Reserve Bank of India vide its circular DOR.No.BP.BC/3/21.04.048/2020-21 dated August 6, 2020 on “Resolution Framework for COVID-19-related Stress” (“Resolution Framework – 1.0”) had provided a window to enable lenders to implement a resolution plan in respect of eligible corporate exposures without change in ownership, and personal loans, while classifying such exposures as Standard, subject to specified conditions.
The resurgence of Covid-19 pandemic in India in the recent weeks and the consequent containment measures to check the spread of the pandemic may impact the recovery process and create new uncertainties. With the objective of alleviating the potential stress to individual borrowers and small businesses, RBI vide its circular DOR.STR.REC.11/21.04.048/2021-22 dated May 05, 2021, on “Resolution Framework – 2.0” has provided the extended window to enable lenders to implement a resolution plan. These set of measures are broadly in line with the contours of the Resolution Framework – 1.0, with suitable modifications.
The above RBI Notification inter alia mandates the lending institutions to put in place a Board approved policy detailing the eligibility of borrowers in respect of whom the lending institutions shall be willing to consider the resolution, and shall lay down the due diligence considerations to be followed by the lending institutions to establish the necessity of implementing a resolution plan in respect of the concerned borrower as well as the system for redressing the grievance of borrowers who request for resolution under the window and / or are undergoing resolution under this window. Accordingly, this policy details the intent, process and objective criteria for restricting of the loans affected by Covid-19 for approval by the Board of Loantap Credit Products Private Limited (“Loantap” or the “company”).
B. Borrowers/ Customers eligible for restructuring 2.0
The borrowers whose accounts were classified as standard as on March 31, 2021, and were not granted any restructuring in terms of the Resolution Framework – 1.0 can request the company for restructuring under Resolution Framework – 2.0 and the company can implement the below parameters individually or in combination while giving restructuring to such borrowers:
a) To increase the rate of interest
b) To increase the outstanding tenure of the loan up to 24 (Twenty-Four) months
c) Granting moratorium up to 24 (Twenty-Four) months
Further, borrowers to whom the restructuring was already granted in terms of the Resolution Framework – 1.0 can request the company for moratorium under Resolution Framework – 2.0.
C. Process of application and due diligence performed by the company
The Borrower/ Customers must communicate to Loantap on e-mail: firstname.lastname@example.org from their registered
e-mail id for granting restructuring of account along with the valid reasons of impact on the income by COVID -19.
The reduction of income and its financial impact on the customer will be reviewed by the Loantap basis the documents / information provided which does show the drop in cash flow due to the COVID-19 impact. Loantap will assess the viability of the customer to pay the restructured EMIs basis the documents provided, before granting the restructuring. Apart from the viability calculations, the repayment track record of the customer, credit bureau records, and the responses given by the customer while availing moratorium/restructuring earlier will also be factored in the restructuring decision.
As per the notification, the resolution plan for borrower account should be invoked by 30 th September 2021. Accordingly, Loantap would identify borrowers eligible for availing the resolution scheme on or before September 30, 2021 and strive to implement the same before 31 st December 2021 which is regulatory timeline for implementation of restructuring as per RBI circular.
E. Review/Revision of Policy
If at any point a conflict of interpretation / information between the Policy and any regulations, rules, guidelines, notification, clarifications, circulars, master circulars/ directions issued by relevant authorities (“Regulatory Provisions”) arises, then interpretation of the Regulatory Provisions shall prevail. Other terms relating to restructuring remain same as previous policy of the company on restructuring i.e., Resolution Framework – 1.0. In case of any amendment(s) and/or clarification(s) to the Regulatory Provisions, the Policy shall stand amended accordingly from the effective date specified as per the Regulatory Provisions and as approved by the majority members of the Steering Committee of the Company. The Board reserve(s) the right to alter, modify, add, delete, or amend any of the provisions of the Policy.