Covid - Corporate Debtor - Central Bank

Introduction The Reserve Bank of India (the “RBI”) being the Central Bank has been trying to shield the borrowers from the effect of Covid-19 since the beginning of the pandemic by announcing several measures to mitigate the immediate impact on various sectors. One of the first set of measures announced by the RBI were the introduction of moratorium period of 6 (six) months in repayment of the borrowings to alleviate the immediate financial stress on the borrowers.

- Pratish Kumar, Saurabh Sharma and Karan Abichandani

The aforesaid moratorium ended on 31st August 2020. To further ease the financial difficulties of the borrowers and keeping the Covid-19 affected borrowers outside the ambit of Non-Performing Assets (“NPA”), the RBI introduced a onetime window by issuing a circular on Resolution Framework for COVID-19 related stress dated 6th August 2020 (the “Covid Framework”).

Covid Framework

Under the Covid Framework, the lending institutions have been allowed to restructure a loan in respect of corporate exposures and personal loans which are under stress due to COVID-19. Banks are allowed to keep the asset standard even if there is no change of ownership.

1 Date on which both the borrower and lending institution have agreed to proceed with a resolution plan under the Covid Framework. If there are multiple lenders to the borrower, the resolution process shall be treated as invoked if lenders representing 75 percent by value of the total outstanding credit facilities (fund based as well non-fund based), and not less than 60 percent of lenders by number agree to invoke the same.

Supreme Court in Action

1) Several writ petitions were filled before the Supreme Court of India (“SC”) since the beginning of the lockdown in March 2020, challenging various measures announced by the RBI to mitigate the immediate impact on various sectors in the wake of Covid-19.