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RBI measures | UPSC

UPSC Current Affairs for UPSC IAS

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UPSC Syllabus: Mains – GS Paper III – Indian economy
Context: RBI announced some measures to protect small individual borrowers and MSMEs during current medical emergency. RBI has launched Resolution Framework.

What is Resolution Framework?

An opportunity for small borrowers to get their due repayments clear. A resolution plan is a proposal that aims to provide a resolution to the problem of the  debtor’s insolvency and its consequent inability to pay off debts.

For example: Under IBC, resolution plan needs to be approved by the committee of creditors (“COC”) and comply with mandatory requirements prescribed in IBC.

Who are eligible?

  • Those with aggregate exposure of up to 25cr,
  • who have not availed restructuring previously, and
  • whose loan is classified as standard.
  • Those who have already availed the previous framework could get extension on the period of

RBI has also allowed Small Finance Bank to lend afresh to Micro Finance Institution (with asset size upto 500 crore).

RBI has also increased the window of overdraft facility to state from 36 days to 50 days in one quarter.

Debt restructuring is a process used by companies, individuals, and even countries to avoid the risk of defaulting on their existing debts, such as by negotiating lower interest rates. Debt restructuring provides a less expensive alternative to bankruptcy when a debtor is in financial turmoil, and it can work to the benefit of both borrower and lender.

Moratorium period is the time during a loan term when the borrower is not required to make any repayment. It is a waiting period before which repayment of EMIs resumes.

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