Page 53 - Banking Finance August 2020

RBI CIRCULAR

implementation conditions, as laid out in the Prudential accounts which may have slipped into NPA
Framework shall be applicable to all lending institutions category between March 2, 2020 and date of
for any resolution plan implemented under this facility. implementation may be upgraded as ‘standard
Terms used in this document, to the extent not defined asset’, as on the date of implementation of the
herein, shall have the same meaning assigned to them restructuring plan. The asset classification benefit
in the Prudential Framework. will be available only if the restructuring is done
as per provisions of this circular.
(Saurav Sinha)
vi. As hitherto, for accounts restructured under these
Chief General Manager-in-Charge guidelines, banks shall maintain additional
provision of 5% over and above the provision
Micro, Small and Medium Enterprises already held by them.
(MSME) sector – Restructuring of 3. All other instructions specified in the circular dated
February 11, 2020 shall remain applicable.
Advances
RBI/2020-21/17 (Saurav Sinha)
Chief General Manager–in-Charge
August 6, 2020
1. Please refer to the circular DOR.No.BP.BC.34/ Loans against Gold Ornaments and
21.04.048/2019-20 dated February 11, 2020 on the Jewellery for Non-Agricultural End-uses
subject.
RBI/2020-21/19
2. In view of the continued need to support the viable
MSME entities on account of the fallout of Covid19 and August 6, 2020
to align these guidelines with the Resolution Framework
for COVID 19 – related Stress announced for other 1. Please refer to the circulars DBOD.No.BP.BC.27/
21.04.048/2014-15 July 22, 2014 and
advances, it has been decided to extend the scheme
permitted in terms of the aforesaid circular. DBR.RRB.BC.No.53/31.01.001/2016-17 dated February
Accordingly, existing loans to MSMEs classified as 16, 2017. Under the extant guidelines, loans sanctioned
by banks against pledge of gold ornaments and
'standard' may be restructured without a downgrade
in the asset classification, subject to the following jewellery should not exceed 75 per cent of the value of
conditions: gold ornaments and jewellery.
i. The aggregate exposure, including non-fund based 2. With a view to further mitigate the economic impact
facilities, of banks and NBFCs to the borrower does of the Covid19 pandemic on households, entrepreneurs
not exceed Rs. 25 crore as on March 1, 2020. and small businesses, it has been decided to increase
the permissible loan to value ratio (LTV) for loans
ii. The borrower’s account was a ‘standard asset’ as
against pledge of gold ornaments and jewellery for non-
on March 1, 2020.
agricultural purposes from 75 per cent to 90 per cent.
iii. The restructuring of the borrower account is This enhanced LTV ratio will be applicable up to March
implemented by March 31, 2021. 31, 2021 to enable the borrowers to tide over their
iv. The borrowing entity is GST-registered on the date temporary liquidity mismatches on account of COVID
of implementation of the restructuring. However, 19. Accordingly, fresh gold loans sanctioned on and
this condition will not apply to MSMEs that are after April 1, 2021 shall attract LTV ratio of 75 per cent.
exempt from GST-registration. This shall be 3. Other terms and conditions of the above-mentioned
determined on the basis of exemption limit circulars shall remain applicable.
obtaining as on March 1, 2020.
(Saurav Sinha)
v. Asset classification of borrowers classified as Chief General Manager-in-Charge
standard may be retained as such, whereas the

BANKING FINANCE | AUGUST | 2020 | 53