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Resolution Framework for COVID-19 Related Stress

Resolution of Stress in Personal Loan.

In line with the RBI guidelines and to support our customers in times of distress, Karnataka Bank is offering its customers relief under Resolution Framework in respect of loans. The Resolution Framework is implemented to mitigate the pains caused by COVID-19 pandemic.

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  • What is Resolution Framework for Covid-19 related Stress?
  • The Resolution Framework is a restructure package to provide relief to borrowers affected by the Covid-19 pandemic related issues.
  • Which are the types of advances / loan accounts covered under this Framework?
  • Personal loans sanctioned to individual borrowers such as (a) Consumer Credit, (b) Education Loan, (c) Loans given for creation / enhancement of immovable assets (e.g., housing etc.,) and (d) Loans given for Investment in Financial Assets (shares, debentures, etc.,) (As defined in the RBI Circular vide RBI/2017-18/117, DBR.No.BP.BC.99/ 08.13.100/2017-18 dt. 04.01.2018 – XRBL Returns – Harmonization of Banking Statistics).
  • Who are eligible under this Resolution Framework?
  • a. Only those borrower accounts classified as Standard Account, but not in default for more than 30 days as on March 1, 2020 are eligible for resolution under this framework.
    b. Only those Borrowers who have been affected by Covid-19 pandemic.
    c. The eligible borrowers accounts should continue to be classified as Standard till the date of invocation of resolution under this framework.
  • What is Date of Invocation?
  • The date of invocation is the date on which both the borrower and the Bank have agreed to proceed with a resolution plan under this framework. The resolution under this framework to be invoked not later than December 31, 2020 and must be implemented within 90 days from the date of invocation.
  • Is the Resolution Framework applicable to loans availed after 1st March 2020 but affected by Covid-19 pandemic?
  • No, only those loan accounts availed prior to 01.03.2020, are eligible for consideration under this Framework subject to meeting eligibility criteria.
  • What are the available relief under this Resolution Plan?
  • The Resolution Plan may inter alia include rescheduling of payments, conversion of any interest accrued, or to be accrued, into another credit facility, or granting of moratorium, based on an assessment of income streams of the borrower, subject to a maximum of TWO YEARS. Correspondingly, the overall tenor of the loan may also get modified commensurately. The moratorium period, if granted, shall come into force immediately upon implementation of Resolution Plan.
  • What is moratorium?
  • Moratorium means Holiday Period. During the Holiday Period, borrower is not required to pay EMIs on the loan.
  • Whether Interest will be applied during moratorium?
  • Yes. Interest will be applied during moratorium period.
  • Whether moratorium mentioned above will be in addition to the moratorium already granted by the Bank earlier on account of Covid-19 related stress?
  • Yes, the moratorium sanctioned under this Framework will be in addition to the moratorium granted by the Bank earlier.
  • If the borrower have surplus cash during Moratorium, whether he/she/they can pay EMIs during moratorium?
  • Yes. This will help in reducing interest charge on the loan account.
  • Whether there will be any change in EMI?
  • Yes. On account of moratorium granted, the tenure of the loan will be extended by the period of moratorium and the EMI payable after the moratorium will be recalculated and advised to the borrower.
  • Whether a borrower can apply for relief under this Framework for more than one account?
  • Yes, Relief under this Framework in more than one account can be applied by a borrower.
  • Whether any processing charge for the relief being extended?
  • No. There is no processing charge for the relief extended under Resolution Framework.
  • What type of loans are not eligible under Resolution Framework.
  • a. MSME Borrowers with aggregate exposure to lending institutions collectively, is Rs. 25.00 crore or less as on March 1, 2020. (to whom separate scheme is available)
    b. Farm Credit as listed in Paragraph 6.1 of Master Direction – FIDD. CO. Plan.1/04.09.01/2016-17 or other relevant instructions as applicable to specific category of lending institutions.
    c. Loans to Primary Agricultural Credit Societies (PACS), Farmers’ Service Societies (FSS) and Large-sized Adivasi Multi – Purpose Societies (LAMPS) for on-lending to agriculture.
    d. Exposures of lending institutions to financial service providers.
    e. Exposures of lending institutions to Central and State Governments, Local Government bodies (Eg. Muncipal Corporations); and, body corporate established by an Act of Parliament or State Legislature.