The Securities and Exchange Board of India (“SEBI”) had by way of its circular, dated March 30, 2020 (“March Circular”), provided certain relaxations from recognition of default by the Credit Rating Agencies (“CRAs”) owing to moratoriums permitted by the Reserve Bank of India (“RBI”) and lockdowns imposed due to COVID-19. 

Further, on August 6, 2020, the RBI by way of 'Resolution Framework for COVID-19 related Stress' ("Resolution Framework") provided for a resolution window under the existing RBI (Prudential Framework for Resolution of Stressed Assets) Directions 2019, dated June 7, 2019 ("Prudential Framework"), to mitigate financial stress faced by borrowers on account of the COVID-19 pandemic. Eligible loans classified as ‘standard’, but not in default for more than 30 (thirty) days with the lenders as on March 1, 2020, were made eligible for resolution under the Resolution Framework.

In view of the Resolution Framework, SEBI has vide its circular dated August 31, 2020 (“Circular”), allowed CRAs to not recognize default, if the CRAs are of the view that restructuring by lenders/ investors is solely due to COVID-19 related stress or under the Resolution Framework. 

The Circular has extended the aforesaid relaxations till December 31, 2020. 

Please find a copy of the March Circular here, a copy of the Resolution Framework here and a copy of the Circular here.

This update has been contributed by Aastha (Partner) and Swaraj Singh Narula (Associate).