Benefits from Covid 19 – RBI Regulatory Package

Moratorium Given :

1. Terms loans– All term loans such as agricultural term loans, retail, and crop loans will be given Moratorium of 3 months for payment of all installments(Principle and Interest) falling in b/w 01.March.2020 to 31.May.2020.

So after three months, the repayment schedule of the loans will be shifted accordingly so as to recover the delayed installments over the period.

2. Working capital loans– In these kinds of facilities Interest deferment for the months of March, April, May can be availed by the borrower on the application to the Bank. So the Interest for 3 months will not be recovered on a monthly basis but the accumulated accrued interest will be recovered after the third month immediately.

FAQs on the Covid 19 – RBI Regulatory Package

Question 1 – Whether this scheme is Mandatory or optional?

Answer 1 – It is an optional benefit.

Question 2 – How to opt. for such benefit?

Answer 2 – The borrower has to make an application to the respective bank in order to avail such benefit. Bank cannot apply scheme at its own without any application.

Question 3 – Whether the interest will apply to the balance outstanding of 29.Feb.2020 if a moratorium has opted?

Answer 3 – Yes, The interest will duly accrue on the balance outstanding during the moratorium period.

Question 4 – Whether such benefit can be availed for Credit Card?

Answer 4 – Yes, Moratorium may also be availed on these dues i.e. Credit card due can be deferred for 3months on the application of card user.

Question 5 – Whether this benefit can be availed from NBFCs and Cooperative Banks?

Answer 5 – Yes, this RBI scheme applies to NBFCs and Cooperative banks also.

Question 6 – Whether the CIBIL score will get affected due to availment of such benefits?

Answer 6 – No, The rescheduling of payments, including interest, will not qualify as a default for the purposes of supervisory reporting  and reporting  to  Credit  Information  Companies such as CIBIL by the lending institutions.

So, It will not adversely impact the credit history of the beneficiaries.

Other benefits from Covid 19 – RBI Regulatory Package

These benefits may vary bank to bank, However as per COVID-19 – Regulatory Package –

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, banks may recalculate the ‘drawing power’ by reducing the margins and/or by reassessing the working capital cycle.

Most of the banks are giving 10% Enhancements in Current sanction limit of CC/OD on the basis of availability of required Stock in trade and other required securities. But these benefits can vary from bank to bank.

Effects on NPA classification of COVID-19 – Regulatory Package

As this Moratorium, Interest deferment is provided  specifically  to  enable  the  borrowers  to  tide  over  economic  fallout  from  COVID-19.

So these will not result in asset classification downgrade.

Classification of NPA norms rules will apply after the completion of the deferment period and as per the revised terms as permitted.

Examples:

Consider that a Term loan is overdue for 10 days on 29.Feb.2020 and the borrower has opted for benefits provided i.e. Moratorium of EMIs for the next 3months.

For such a loan the period from 01.March.2020 to 30.May.2020 shall not be considered for calculating the period of 90 days for the NPA classification of such loans.

But from 01.June.2020 onwards NPA overdue period calculation will start

If such loans remained outstanding for more than 80 days after 01.June.2020

It will be classified as NPA.

Provisioning of In Default Standard Accounts as on 29.FEB.2020

In respect of accounts in default but standard (i.e. overdue) as on 29.Feb.2020 and which has availed the COVID package Moratorium, the period of next 3 months shall be excluded from calculating the number of days for the purpose 90 days of NPA classification.

But the lending institutions shall make general provisions of not less than 10 percent of the total outstanding of such overdue accounts, to be phased over two quarters as under:

(i) Quarter ended March 31, 2020 – not less than 5 percent

(ii) Quarter ending June 30, 2020 – not less than 5 percent.

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Qualification: CA in Practice
Company: GSKG & ASSOCIATES
Location: MANDI GOBINDGARH, Punjab, IN
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