Revised restructuring norms: Impact on project loans

On 12 February, the Reserve Bank of India (RBI) issued a revised framework on resolution of stressed assets. The revised framework replaces most of the RBI’s previous guidelines on stressed assets, and tries to align the guidelines with the current regime under the Insolvency and Bankruptcy Code, 2016 (IBC).

The revised framework applies to all scheduled commercial banks (except regional rural banks), and all-India financial institutions such as the EXIM Bank.

Loan accounts having lenders’ exposure of ₹20 billion (US$305 million) or more are defined as large accounts. For such accounts a resolution plan (which includes restructuring of the existing terms and conditions of the loan) needs to be implemented within 180 days from 1 March 2018 (the reference date), if the borrower is in default on that date, or the date of the first default by the borrower after the reference date.

The RBI said that it will announce over a two-year period the reference dates for implementing the resolution plan of loan accounts having lenders’ exposure from ₹1 billion to ₹20 billion, to ensure calibrated, time-bound resolution of all such loan accounts in default.

Avinash Kumar Khard is an associate partner at HSA Advocates. HSA is a full-service firm with offices in New Delhi, Mumbai, Bengaluru and Kolkata.