Restructuring Policy 2.0

• Accounts which are standard as on March 31st, 2021 are eligible.
• The cash flow / income of the borrower must be impaired due to the ongoing COVID19 pandemic

Applicability

• Individuals who have availed of personal loans (as defined in the Circular DBR.No.BP.BC.99/08.13.100/2017-18 dated January 4, 2018 on “XBRL Returns – Harmonization of Banking Statistics”)
• Individuals who have availed of loans and advances for business purposes and to whom the lending institutions have aggregate exposure of not more than Rs.25 crore as on March 31, 2021
• 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 Rs.25 crore as on March 31, 2021

Ineligible Loans

- Loans to SHDFCL employees
- Loans to financial service providers
- Compromise settlements are not permitted as a resolution plan for this purpose

It is to be noted that extension of relaxation must benefit the borrowers who have sound businesses and repayment capabilities but are unable to meet their obligations due to widespread disruption caused by the pandemic.

i. The resolution plans may inter alia include the followings:

- rescheduling of payment
- conversion of any interest accrued, or to be accrued, into another credit facility,
- granting of moratorium

based on an assessment of income streams of the borrower

ii. The moratorium period, if granted, may be for a maximum of two years, and shall come into force immediately upon implementation of the resolution plan. The extension of the residual tenor of the loan facilities may also be granted to borrowers, with or without payment moratorium. The overall cap on extension of residual tenor, inclusive of moratorium period if any permitted, shall be two years. iii. In respect of borrowers where the resolution process has been invoked, SHDFCL is permitted to sanction additional finance even before implementation of the plan to meet the interim liquidity requirements of the borrower. iv. This facility of additional finance may be classified as ‘Standard’ till implementation of the plan. However, if the resolution plan is not implemented within the stipulated timelines, the asset classification of the additional finance sanctioned will be as per the actual performance of the borrower with respect to such additional finance or performance of the rest of the credit facilities, whichever is worse.

The following provisions shall apply for the resolution framework

1. The resolution must be invoked not later than September 30, 2021 and must be implemented within 90 days from the date of invocation.

2. The date of invocation shall be the date on which SHDFCL borrower agreed to proceed with the plan.

a) Written consent shall be obtained from borrower for the mutually agreed resolution plan.

b) The resolution plan shall be deemed to be implemented only if all the conditions in Paragraph 10 of the Annex to the Resolution Framework – 1.0 are met

- Revised sanction letter / agreement with customer’s acceptance
- Updated KYC
- Credit PD
- Borrower’s application form and undertaking stating that he / she is impacted financially by the COVID-19 pandemic in the form of reduction / loss of income or cash flows.

Salaried (on best effort basis)

• Up-to-date salary slips from January 2020 / Borrower declaration in case of cash salaried
• Up-to-date bank account statement from January 2020 for the account in which salary is credited
• Proof of loss of job from previous employer (in case of loss of job)
• Borrower’s declaration of current unemployment and previous income levels

Self Employed (on best effort basis)

• Bank account statements for previous 12 months
• GST returns for H1 FY2020 and H1 FY2021 and Profit and loss statement / Balance sheet for the last 2 years (if applicable)
• Udyam certificate (if available)
• Borrower’s declaration of current income levels and previous income levels

1. Upon implementation of the agreed plan, the asset classification of such accounts shall remain as Standard.

2. Accounts which slipped into NPA between invocation and implementation shall also be upgraded to Standard as on the date of implementation of the plan.

3. Additional finance to borrowers in respect of whom the resolution plan has been invoked, if sanctioned even before implementation of the plan in order to meet the interim liquidity requirements of the borrower, may be classified as ‘standard asset’ till implementation of the plan regardless of the actual performance of the borrower with respect to such facilities in the interim

4. Asset classification post implementation shall be as per the extant RBI norms on asset classification

SHDFCL will keep provisions from the date of implementation, which are higher of the provisions held as per the extant IRAC norms immediately before implementation, or 10 percent of the renegotiated debt exposure of SHDFCL post implementation (residual debt). Half of the above provisions may be written back upon the borrower paying at least 20 per cent of the residual debt without slipping into NPA post implementation of the plan, and the remaining half may be written back upon the borrower paying another 10 per cent of the residual debt without slipping into NPA subsequently.

The provisions required to be maintained under this window, to the extent not already reversed, shall be available for the provisioning requirements when any of the accounts, where a resolution plan had been implemented, is subsequently classified as NPA

After implementation of the resolution plan in terms of this facility, the subsequent asset classification will be governed by the criteria laid out in the Master Circular - Prudential norms dated July 1, 2015 or other relevant instructions as applicable to SHDFCL.

In all the cases, further upgradation shall be subject to implementation of a fresh restructuring under the Prudential Framework, or the relevant instructions as applicable. Upon completion of the monitoring period without being classified as NPA, the asset classification norms will revert to the criteria laid out in the Master Circular – Prudential norms or other relevant instructions as applicablee

The provisions required to be maintained under this window, to the extent not already reversed, shall be available for: (i) the provisioning requirements when any of the accounts, where a resolution plan had been implemented, is subsequently classified as NPA; as well as, (ii) the additional provisioning requirements as mentioned in the Prudential Framework.

• Applicable to LAP - MSME accounts only
• The account was a ‘standard asset’ as on March 31, 2021
• The aggregate exposure, of banks and NBFCs to the borrower does not exceed ₹25 crore as on March 31, 2021.
• The borrower’s account was not restructured earlier
• The restructuring of the borrower account should be invoked by September 30, 2021 and must be implemented within 90 days from the date of invocation
• The restructuring shall be treated as invoked when SHDFCL and the borrower agree to proceed with the efforts towards finalising a restructuring plan to be implemented in respect of such borrower.
• The borrowing entity is GST-registered on the date of implementation of the restructuring. However, this condition will not apply to MSMEs that are exempt from GST-registration. This shall be determined on the basis of exemption limit obtaining as on March 31, 2021.
• If the borrower is not registered in the Udyam Registration portal, such registration shall be required to be completed before the date of implementation of the restructuring plan for the plan to be treated as implemented.
• The decisions on applications received by SHDFCL from their borrowers for invoking restructuring shall be communicated in writing to the borrower by the SHDFCL within 30 days of receipt of such applications.
• The decision to invoke the restructuring under this facility shall
• In respect of restructuring plans, asset classification of borrowers classified as standard may be retained as such, whereas the accounts which may have slipped into NPA category between April 1, 2021 and date of implementation may be upgraded as ‘standard asset’, as on the date of implementation of the restructuring plan.
• Upon implementation of the restructuring plan, SHDFCL shall keep provision of 10 percent of the residual debt of the borrower
• All restructuring accounts will have to be approved by a resolution committee comprising of Chief Operating Officer, Chief Business Officer, Head – Credit and Service, Head – Credit Policy and Risk Control
• All other instructions specified in the circular DOR.No.BP.BC/4/21.04.048/2020-21 dated August 6, 2020 shall remain applicable.
• RBI notification titled “Resolution 2.0 of Covid-19 related stress of Micro, Small and Medium Enterprises (MSME) sector – Restructuring of Advances” dated May 5, 2021 to be referred for all other policy parameters