Policy - Restructuring of Advances 2.0

Definition

The borrower should be classified as a micro, small or medium enterprise (MSME) as on March 31, 2021 in terms of the Gazette Notification S.O.2119 (E) dated June 26, 2020 (Revised MSME definition)

Personal loans refer to loans given to individuals and consist of

• Consumer credit (Personal Loans,  personal loans secured by gold, gold jewellery, immovable property  (other than for business / commercial purposes), personal loans to professionals (excluding loans for business purposes), loans given for other consumptions purposes (e.g., social ceremonies, etc.)
• Education loan, loans given for creation/ enhancement of immovable assets (i.e. Housing etc)

Except loans extended to staff.

• Individuals who have availed of loans and advances for business purposes, and
• To whom the lending institutions have aggregate exposure of not more than Rs.50 crore as on March 31, 2021.

• Small businesses, including those engaged in retail and wholesale trade, other than those classified as MSME as on March 31, 2021, and
• To whom the lending institutions have aggregate exposure of not more than Rs.50 crore as on March 31, 2021.

Provided that the borrower accounts/credit facilities do not belong to the following categories:

• MSME borrowers whose aggregate exposure to lending institutions collectively, is Rs.50 crore or less as on March 31, 2021.
• All the Farm credit exposures of all lending institutions including NBFCs, as listed in Paragraph 6.1 of Master Direction FIDD.CO.Plan.1/04.09.01/2016-17 dated July 7, 2016 (as updated) or other relevant instructions as applicable to specific category of lending institutions, except for loans to allied activities, viz., dairy, fishery, animal husbandry, poultry, bee-keeping and sericulture are excluded from the scope of the Resolution Framework.

Note: Subject to the above, loans given to farmer households would be eligible for resolution under the Resolution Framework if they do not meet any other conditions for exclusions listed in the Resolution Framework

• Loans to Primary Agricultural Credit Societies (PACS), Farmers' Service Societies (FSS) and Large-sized Adivasi Multi- Purpose Societies (LAMPS) for on-lending to agriculture.
• Exposures of lending institutions to financial service providers. Financial service providers shall have the same meaning as in sub-section (17) of Section 3 of the Insolvency and Bankruptcy Act, 2016 
• Exposures of lending institutions to Central and State Governments; Local Government bodies (eg. Municipal Corporations); and, body corporates established by an Act of Parliament or State Legislature.

Eligibility

• Borrower account was standard (<90 DPD) as on March 31, 2021 with Fedfina
• Borrower is impacted by COVID-19
• Borrower accounts should not have availed any resolution in terms of the Resolution Framework 1.0 (under MSME Restructuring circulars or previous MSME restructuring circulars)
• Customer a/c is live as on date of approval (including portfolio under Direct Assignment basis subject to comfort from Assignee)
•  The aggregate exposure, including non-fund based facilities, of all lending institutions to the borrower does not exceed Rs.50 crore as on March 31, 2021
• The borrowing entity is GST-registered on the date of implementation of the restructuring. However, this condition will not apply to MSMEs that are exempt from GST-registration. This shall be determined on the basis of exemption limit obtaining as on  March 31, 2021
• The borrowing entity is registered in the Udyam Registration Portal

• Borrower account was Standard (<90 DPD) as on March 31, 2021 with Fedfina
• Borrower is impacted by COVID-19
• Borrower accounts should not have availed any resolution in terms of the Resolution Framework 1.0
• Customer a/c is live as on date of approval (including portfolio under Direct Assignment basis subject to comfort from Assignee)

Criteria for assessing Covid impact

• All industries except for essential commodities (or)
• Business is down by 20% or more (on annualised basis) as compared to pre Covid levels (or)
• Business margins have reduced by 20% or more

Salaried:

• Job loss, (or)
• Employment gap of min 2 months during Covid period (Apr 20 onwards), (or)
• Salary reduction by 20% or above, (or)
• Other impacts due to Covid (Job losses/salary reduction in family or medical expenses)

Self Employed:

• All industries except for essential commodities (or)
• Business is down by 20% or more (on annualized basis) as compared to pre covid levels. (or)
• Business margins have reduced by 20% or more

Self Employed:

• All industries except for essential commodities (or)
• Business is down by 20% or more (on annualized basis) as compared to pre covid levels. (or)
• Business margins have reduced by 20% or more

Self Employed:

• All industries except for essential commodities (or)
• Business is down by 20% or more (on annualized basis) as compared to pre covid levels. (or)
• Business margins have reduced by 20% or more

Due diligence for resolution plan

• Ensuring that all criteria are  met as per the guidelines
• Bank Statement evaluation of last 6 months
• GST return review of FY 2019-20 (or Financials of FY 20), FY 2020-21, and FY 2021-22 to establish the impact of the business  (or other assessment like Banking credit etc in cases where GST is not applicable)

Salaried:

• Ensuring that all criteria are  met as per the guidelines
• Salary slip review for impact in salary or job loss document

Self-employed:

• Ensuring that all criteria are  met as per the guidelines
• Bank Statement evaluation of last 6 months
• GST return review of FY 2019-20 (or Financials of FY 20), FY 2020-21, and FY 2021-22 to establish the impact of the business  (or other assessment like Banking credit etc in cases where GST is not applicable)

• Ensuring that all criteria are  met as per the guidelines
• Bank Statement evaluation of last 6 months
• GST return review of FY 2019-20, FY 2020-21, and FY 2021-22 to establish the impact of the business  (or other assessment like Banking credit etc in cases where GST is not applicable)

• Ensuring that all criteria are  met as per the guidelines
• Bank Statement evaluation of last 6 months
• GST return review of FY 2019-20 (or Financials of FY 20), FY 2020-21, and FY 2021-22 to establish the impact of the business  (or other assessment like Banking credit etc in cases where GST is not applicable)

Resolution plan

• Rescheduling of payments (Reducing EMI and Increasing tenure etc), or
• Granting of moratorium (principal or principal and interest), based on an assessment of income streams of the borrower, subject to a maximum of two years with overall tenure extension not beyond two years.  and shall come into force immediately upon implementation of the resolution plan, or
• Sanctioning of additional credit facilities to cure a default or otherwise, or
• Modifications in securities, borrowers & guarantees
• Modification in rate of Interest, charges etc.
• Offering certain waivers (within Board approved framework)

Note:

1. Combination of the Resolution Plan can be offered at the sole discretion of Fedfina
2. However, compromise settlements are not permitted as a resolution plan for this purpose

Invocation of resolution process

The resolution process shall be treated as invoked when Fedfina and the borrower agree to proceed with the efforts towards finalising a resolution plan to be implemented in respect of such borrower. The decision to invoke restructuring under this facility shall be taken by Fedfina independent of invocation decisions taken by other lending institutions, if any, having exposure to the borrower.

Communication of decision

Fedfina will communicate the decision in writing within 30 days of receipt of application from customer

Last date for invocation

30-September-2021

Implementation of resolution plan

Within 90 days from the date of invocation

Note: If the borrower is not registered in the Udyam Registration portal, such registration shall be required to be completed before the date of implementation of the restructuring plan for the plan to be treated as implemented

Within 90 days from the date of invocation

Implementation shall be deemed to be implemented only if

• all related documentation, including execution of necessary agreements between Fedfina and borrower and collaterals provided, if any, are completed by the lenders concerned in consonance with the resolution plan being implemented;
• the changes in the terms of conditions of the loans get duly reflected in the books of Fedfina; and,
• Borrower is not in default with Fedfina as per the revised terms.

Convergence of norms for loans restructured previously

i.e. Option of Covid  restructuring 2nd time

Not allowed

If for loan accounts restructured under the terms of the Resolution Framework 1.0 with following norms,

• Resolution plan had not permitted moratorium (Or)
• Moratorium of less than 2 years (Or)
• Extension of residual tenor by a period of less than 2 years

Then, such loan accounts are eligible for modification of resolution plan to the extent of increasing the period of moratorium/extension of residual tenor subject to moratorium period & extension of residual tenor not beyond 24 months.

The overall caps on moratorium and / or extension of residual tenor granted under Resolution Framework – 1.0 and 2.0 combined, shall be two years.

Detailed due diligence shall be undertaken again to assess impact of Covid. Other conditions and timelines for implementation etc will be as per Restructuring 2.0.