RESTRUCTURING OR RENURTURING FOR SMALLER BUSINESS : RBI


Again, we are expressing our concerns over the second wave of Covid-19 where as on the other hand we offer precautions as the so-predicted third wave can be more dangerous and deadly, which still brings up a big question mark on our preserved resources for future. Amidst all of this the lockdown which was only way to pause all of this, came with its own cons, like, economic setback, black marketing, and closure or merger of small businesses.
Small business are classified so based on the amount of investment, i.e., between one to five crore, it comes under this. These businesses saw major loss as all the window shopping was shut in pandemic. When the first wave came, the economy was dwindling, yet, the banks issued moratorium for all those people who were unable to give loans due to the loss of income source. But, as soon as things got better, the bank worked full fledged and so the citizens were liable to pay off the loans.
But, now the major question arises is “what about the second wave of Covid-19?” RBI comes to the rescue of these small businesses who have taken loan of amount Rs. 25 crores from the bank, for restructuring their debts and managing the finances they have. On Wednesday, it was decided that eligible categories would include consumer credit, education loan, loans given for creation or enhancement of immovable assets such as housing, and loans for investment in financial assets such as shares and debentures.
Small businesses, including those engaged in retail and wholesale trade other than those classified as micro, small and medium enterprises (MSMEs) will also be eligible.
In another notification, Central Bank also allowed MSME’s with the loan upto ₹5 Cr. For recast under what it calls “Resolution Framework 2.0”.
RBI said that the resolution process will be treated as invoked when the lender and the borrower agree to proceed towards finalizing a resolution plan. Once invoked, borrowers will also be eligible for additional loans. The policy, RBI said, should detail the eligibility of borrowers for whom lenders will consider the resolution, and lay down the due diligence considerations to establish the necessity of implementing a resolution plan. Lenders will have to set aside 10% of the renegotiated debt exposure as provision buffers for each loan.
This surely brings a wave of relief to all the small businesses. As the stress of Corona is not over yet.

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