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The Review Period shall commence not later than: 13. No.21/ / 2015-16 dated March 17, 2016, as amended from time to time. Any RP under consideration as on the date of this circular may be pursued by lenders under this revised framework subject to meeting the requirements/conditions specified in this framework.
The RP may involve any action / plan / reorganization including, but not limited to, regularisation of the account by payment of all over dues by the borrower entity, sale of the exposures to other entities / investors, change in ownership and restructuring 14. Section I(E) of the framework shall not be in derogation to the provisions of the circular DBR. Yours faithfully, (Saurav Sinha) Chief General Manager-in-Charge Annex – 1 Prudential Norms Applicable to Restructuring 1.
RPs involving restructuring / change in ownership in respect of accounts where the aggregate exposure of lenders is ₹ 1 billion and above, shall require independent credit evaluation (ICE) of the residual debt by credit rating agencies (CRAs) specifically authorised by the Reserve Bank for this purpose. BC.2//2015-16 dated July 1, 2015 on ‘Prudential norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances’. Section I(B), I(C) and I(D) of the framework shall not be applicable to revival and rehabilitation of MSMEs covered by the instructions contained in Circular No. Restructuring is an act in which a lender, for economic or legal reasons relating to the borrower's financial difficulty, grants concessions to the borrower.
The facility of freezing of provisions shall also lapse immediately if the Adjudicating Authority rejects the resolution plan thus submitted. Any additional finance approved under the RP (including any resolution plan approved by the Adjudicating Authority under IBC) may be treated as 'standard asset' during the monitoring period under the approved RP, provided the account demonstrates satisfactory performance (as defined at footnote 14) during the monitoring period.
Any subsequent default after the 180 day period shall be treated as a fresh default, triggering a fresh review. Any action by lenders with an intent to conceal the actual status of accounts or evergreen the stressed accounts, will be subjected to stringent supervisory / enforcement actions as deemed appropriate by the Reserve Bank, including, but not limited to, higher provisioning on such accounts and monetary penalties. Lenders shall need to complement the above with key financial ratios and operational parameters which may include quantitative and qualitative aspects.
(b) A RP which involves restructuring/change in ownership shall be deemed to be implemented only if all of the following conditions are met: 16. In particular, financial difficulty can be identified even in the absence of arrears on an exposure.
In both cases, the asset classification shall continue to be governed by the ageing criteria as per extant asset classification norms. While accounts with aggregate exposure of ₹ 5 billion and above shall require two ratings, those below ₹ 5 billion shall require one rating.
If the ratings are obtained from more than the required number of CRAs, all such ratings shall be investment grade for the account to qualify for an upgrade. If the borrower fails to demonstrate satisfactory performance during the monitoring period, asset classification upgrade shall be subject to implementation of a fresh restructuring/ change in ownership under this Framework or under IBC.