Loan Moratorium Case- No Requirement Of Specific Resolution Plan For Borrowers For Invocation Of Resolution Framework: RBI Tells Supreme Court

Reserve Bank of India has informed the Top Court that borrowers opting for resolution of COVID-related stressed loans shall not be required to submit any specific plans.

RBI has stated that borrowers may invoke resolution framework by submitting a request to the lending institutions.

The Resolution Framework does not require any resolution plan in any form to be submitted to the lending institutions at the time of request for invocation. Rather, for invocation, the borrowers are required to merely submit a request to the lending institutions for being considered under the Resolution Framework

- RBI Tells Supreme Court

Earlier, India's central bank earlier announced a resolution framework to mitigate the financial stresses faced by entities due to disruption in business activity, on account of the Coronavirus pandemic.

In this background, RBI has told top court that the specific contours of resolution plan to be implemented may be decided by the lending institutions, in consultation with the borrower.

"Thereafter, the lending institutions will take an in-principle decision – as per their Board approved policy – on invoking the Resolution Framework. After such invocation, the specific contours of resolution plan to be implemented may be decided by the lending institutions, in consultation with the borrower. While for personal loans the resolution plan is to be implemented within 90 days from the date of invocation, for all other loans a period of 180 days from the date of invocation has been prescribed," the additional affidavit of the RBI reads.

Senior Advocate VV Giri appeared for the Reserve Bank of India on the last date, arguing that the prudence framework was available in terms of the RBI Circulars.

He had argued today that the discretion to frame a resolution plan should be with the bank and not the borrower.

On December 8, the Centre told Supreme Court that to roll out interest waivers would mean that a huge waiver will be attracted which in turn would affect the economy. "If the banks were to bear this burden, it would necessarily wipe out a substantial and a major part of their net worth, rendering most of the banks unviable and raising a very serious question mark over their very survival", said SG while stating that a blanket waiver of interest would mean foregoing an estimated 6 lac crore.

Justice Bhushan told him at this juncture that he courts were conscious of this and that it would not pass any orders which would shake the economy.

The bench led by Justice Ashok Bhushan is expected to continue hearing plea's seeking extension of the Covid19 induced loan moratorium.

Read the thread on what transpired in Court on December 9.