SBI Seeks Promoter Guarantee, Share Pledge For Non-Personal Loan Recast
State Bank of India will seek either a personal guarantee from promoters or pledge of listed shares as part of its process of restructuring non-personal loans.
India's largest lender detailed its rules for such restructuring on Sept. 21, which the Reserve Bank of India permitted without a downgrade in classification of the loan to non-performing. A list of benchmarks have been provided by an RBI-appointed committee on restructuring of loans in individual industries.
Banks, however, have also been asked to frame board level policies for the upcoming restructuring. In a set of frequently asked questions issued, SBI said additional security would need to furnished in the case of restructuring.
The lender also said that an upfront processing fee of 0.25% of the aggregate loan amount would be charged. For term loans and working capital loans, among others, the interest cost would be raised by 100 basis points over the existing rate for working capital loans.
In the case of any additional loan facilities, SBI will ask promoters to contribute capital infusion of 10- 15% of the fresh sanctions. The bank will also retain a right of recompense for any concessions provided during the period.
The framework isn't applicable to personal loans and MSME borrowers with loans up to Rs 25 crore. Restructuring schemes for those categories fall under a separate set of rules, SBI said.
Key highlights of the FAQs are detailed below:
What are the eligibility conditions for my unit to qualify for relief under the framework?
To be eligible under the framework, the following eligibility conditions need to be fulfilled:
1. Your loan should be a “Standard Account” as on date of application and should have been ‘Standard' and also not in default for more than 30 days as on 01.03.2020.
2. Your unit's operations should have been affected by Covid-19 pandemic as a result of which your cash flows/revenues have declined significantly and you aren't in a position to service your loan instalments/ debt.
What documents do I need to provide along with application for being considered for relief under this Framework?
You need to submit the following documents:
1. Board resolution (in case of Companies) stating that the Company's operations are under stress on account of Covid-19. In case of other applicants, an undertaking, that unit's operations are under stress on account of Covid-19.
2. GST returns from April 2020 till the latest available month and also for the corresponding period of the previous year.
3. In case of listed companies, the latest financials filed with stock exchanges to be submitted.
4. Cash budget and projected financials for the period of loan.
5. Any other document as advised by your branch/relationship manager.
Which are the Loans not covered under this Framework of RBI?
The following loans are not covered under this framework:
1. MSME borrowers whose aggregate exposure to lending institutions collectively, is Rs.25 crore or less as on March 1, 2020.
2. Farm credit.
3. Loans to Primary Agricultural Credit Societies (PACS), Farmers' Service Societies (FSS) and Large-sized Adivasi Multi-Purpose Societies (LAMPS) for on-lending to agriculture.
4. Exposures to financial service providers, including NBFCs.
5. Exposures to central and state governments, local government bodies (e.g. municipal corporations) and body corporates established by an Act of Parliament or State Legislature.
What are the relief/relaxations available under the framework in case of term loans?
The following relief/relaxations are available in case of term loans, subject to compliance of bank norms:
1. Moratorium of up to two years for repayment of instalments of principal.
2. Extension in the tenor of the loan by up to a maximum of 2 years.
3. Interest moratorium up to a maximum of six months. The interest accrued during the moratorium period to be capitalised.
What are the relief/relaxations available under the Framework in case of working capital loans?
The following relief/relaxations are available in case of working capital loans, subject to compliance of bank norms:
1. Interest moratorium of up to six months which is repayable within a maximum period of 2 years.
2. Need based additional funding may be provided which shall be repayable in not more than 5 years.
Whether there will be any change in loan instalments?
Yes. On account of moratorium granted, the tenure of your loan can be extended by upto a maximum of 24 months and the instalments payable after the moratorium will be recalculated and advised to you.
If additional loan facilities are sanctioned by the bank, whether any capital has to be infused by the promoters?
Minimum promoter's contribution (capital infusion) of 10-15% of the additional loan facilities sanctioned has to be brought in.
Will any processing fee need to be paid?
Processing fee/ upfront fee of 0.25% of the aggregate limits will be payable.
Will there be any change in pricing of my loans?
Yes, there will be change in pricing to offset cost of additional provisions that the Bank is required to make for extending the benefits under this Resolution Framework.
The pricing would be as under:
1. FITL/WCTL/WCDL sanctioned under the framework: 100 basis points above your current pricing on working capital loans.
2. Any concessions provided during the resolution period shall result in right of recompense.
Whether any additional security will have to be furnished in case relief under the framework is sanctioned?
The following additional security will have to be furnished:
1. In case of unlisted entities, personal guarantee of the promoters will have to be furnished.
2. In case of listed companies, promoters will have to pledge their shares.
What is the last date to apply for relief under the Framework?
1. For loans with aggregate exposure of Rs 1,500 crore and above from the banking system, last date is Nov. 15.
2. For others, the last date to apply for relief under the Framework is Nov. 30.
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