One Time Restructuring

Orange > One Time Restructuring

In pursuant to the RBI circular RBI/2021-22/31 DOR.STR.REC.11/21.04.048/2021-22 dated May 5, 2021, the Company is allowed to offer One Time Restructuring scheme (Resolution Framework 2.0) to those customers who have been affected due to the resurgence of COVID 19 pandemic issue.

  • The customers of ORFIL are from Semi-Urban / Rural Areas with varied demographic and Income stream profiles.
  • The cash flow impact of the segment had been diverse and hence there is need for flexibility for application of Holiday period as per requirements of individual profile segments.
  • The Economic Normalcy of the country is predicted by Dec end. The downward flow of this impact in semi-urban / rural Markets is estimated around Mar’22.
  • Hence the Company has devised a scheme offer of flexible holiday period from April 21.
  • Also, in case the customers would have an improved ability to pay in between months, the flexibility is offered to pay any time in these months, and this would reduce the interest burden created during the period.
Eligibility Criteria
  • All accounts are classified as Standard as on 31st March 2021.
  • All accounts that were not covered in Resolution Framework 1.0 previously approved by the Board
  • All accounts that were covered under Resolution Framework 1.0 previously approved by the Board where the scheme is applied for lesser tenure than 2 years
  • Customers’ livelihood affected due to Covid 19 issue.
  • Credit Bureau Score indicating the profile in Low risk / Medium Risk category.
  • Customer acceptance for Processing Fees as decided by MD &CEO.
Structure of Restructuring offered
  • EMI holiday period commencing from April 2021 till March 2022 on any months where EMI could not be paid
  • The EMI will be kept constant Post the holiday period.
  • Current tenure of the loan will be extended to additional tenure with overall tenure extension restricted at 24 months period with the same EMI.
Process Flow
  • The customers would be educated and encouraged to pay on monthly basis the EMI dues for the month even after being eligible under scheme.
  • Any customers expressing inability to pay during any of the months from April ’21 till March’ 22 will be assessed for the scheme under this policy (Month on Month Basis) and the invocation of the scheme with the approved borrowers will be done on or before 30th Sept’21.
  • The customer will be given an option at that point to avail the scheme with payment of one-time processing fee.
  • The risk classification of the customer will be assessed by checking the bureau report risk score, reason for the stress, number of dues unpaid etc and credit decision will be taken for offering the scheme.
  • In case of chronic market defaulter, the decision to mark the account as NPA and recovery collection action to be initiated.
  • For low risk / medium risk cases, the agreement with the revised terms & conditions will be executed.
  • The customer / Field team will be communicated on the new repayment schedule.
Operational Workflow
  • Every Month end the list of customers under this eligible list will be scanned for non-payment.
  • The list of customers will be given to Credit team for eligibility decisioning and then to Field team for documentation of revised terms and conditions.
  • These customers will be given EMI holiday for the unpaid month/s and the tenure will be re-drawn with Capitalised Interest.
  • The revised repayment schedule will have a control cap of same EMI and additional tenure extension limited to 24 months.
  • Any Grievance/ Compliance from the Customer who request for resolution under the window and / or are undergoing resolution under this window shall be addressed as per the Board approved Grievance Redressal Policy of the Company which is on display in Company’s website.
Documentation Content
  • The revised term loan document will cover the flexibility option of EMI holiday offering From April 2021.
  • It also will cover the optional clause of customer choice to pay any time in between to reduce the interest burden.
  • The processing fee acceptability clause will also be included.
Other Considerations:

– The major co-lenders such as Incred & Northern Arc and Securitisation will fall under the eligibility pool. Co-lenders might ask to pay the FLDG on the OTR customers. This can be mitigated by buying the pool. The extent of impact needs to be estimated only after discussions with the Co-lenders.

– Lender might hold further disbursements till the collection flow stabilises. They might wait till the actual impact of OTR is seen.

– Rating Agency impact will be negative. The mitigation point shall be, to improve the collection flows in the coming months. An increasing trend in collection flow along with capital infusion would help us retain the same rating next year.

Asset classification and Provisioning:
  1. All the loans including the interim finance given before the resolution plan but later covered under the plan will be classified as standard irrespective of the account period before the implementation date.
  2. However, if the plan is not implemented, then the asset classification will follow the regular prudential norms.
  3. The provisioning for the loans will be higher of the below:

      a. Provisions held as per extant as IRAC norms before implementation.

      b. 10% of renegotiated debt post implementation.

  1. The reversal of provisions for the loans will be as follows:

      c. 50% of provisions to be reversed if borrower clears 20% of renegotiated debt post the plan implementation

      d. Remaining 50% of provisions to be reversed post payment of additional 10% of renegotiated debt.

  1. Post implementation, the asset classification will be as per original norms as per the borrower performance on the revised terms.
  2. The provisioning thus done that is not reversed can be adjusted against any provisioning requirements that might arise if any restructured account becomes NPA or additional provisioning requirements for the restructuring of such accounts.
Disclosures formats to Board and RBI:

There are two formats to be disclosed. Format X to be disclosed in the financial statements for the quarters ending September 30, 2021 and December 31, 2021 and Format B as Prescribed in Resolution Framework – 1.0. half yearly till the last account under resolution is either fully paid off or slips into NPA.