The RBI on May 5, 2021, published the Resolution Framework – 2.0: Resolution of COVID-19 Related Stress of Individuals and Small Businesses (‘Resolution Framework – 2.0’) with the objective of alleviating potential stress to individual borrowers and small businesses in light of the resurgence of the COVID-19 pandemic in India, and in furtherance of the Resolution Framework for COVID-19-related Stress published by the RBI on August 6, 2020 (‘Resolution Framework – 1.0’). Resolution Framework – 2.0 was modified by the RBI on June 4, 2021.

Part A of the Resolution Framework – 2.0 (‘Part A’) pertains to requirements specific to resolution of advances to individuals and small businesses, permitting lending institutions to offer a limited window to individual borrowers and small businesses to implement resolution plans with respect to their credit exposures while classifying the same as ‘Standard’ upon implementation of the resolution plan subject to the conditions specified therein. This benefit is available to the following borrowers (excluding certain categories as enumerated thereunder) on such terms as provided in the Resolution Framework – 2.0:

i.    individuals who have availed of personal loans, excluding the credit facilities provided by lending institutions to their own personnel/staff;

ii.   individuals who have availed of loans and advances for business purposes and to whom the lending institutions have aggregate exposure of not more than ₹ 50 crore (approx. US$ 6.75 million) as on March 31, 2021; and

iii.  small businesses, including those engaged in retail and wholesale trade, other than those classified as micro, small and medium enterprises as on March 31, 2021, and to whom the lending institutions have aggregate exposure of not more than ₹ 50 crore (approx. US$ 6.75 million) as on March 31, 2021.

Further, any resolution plan implemented in breach of the stipulations of the Resolution Framework – 2.0, will be fully governed by the RBI circular on Prudential Framework for Resolution of Stressed Assets issued on June 7, 2019.

Part B of the Resolution Framework – 2.0 (‘Part B’) pertains to working capital support for: (i) individuals who have availed of loans for business purposes, and (ii) small businesses, where resolution plans were implemented previously:

i.     requiring lending institutions to frame board approved policies for implementation of viable resolution plans for eligible borrowers under the Resolution Framework – 2.0; and

ii.   permitting lending institutions to (as a one-time measure) review the working capital sanctioned limits and / or drawing power based on a reassessment of the working capital cycle, reduction of margins, etc. without it being treated as a restructuring.

Part C of the Resolution Framework – 2.0 (‘Part C’) lists the disclosure requirements for the lending institutions with respect to the resolution plans implemented under the Resolution Framework – 2.0, which includes publishing of quarterly financial statements in the formats prescribed therein for the quarters ending September 30, 2021 and December 31, 2021. Further, the resolution plans implemented in terms of Part A should also be included in the continuous disclosures required as per the formats prescribed in the Resolution Framework – 1.0.