Regulatory updates: COVID-19 relaxations for stressed businesses

Regulatory updates: COVID-19 relaxations for stressed businesses

Legal & Compliance

Makarand Lele

Makarand Lele

4 Apr 2020, 13:10 — 10 min read

Important regulators of India have extended several relaxations from compliance of various provisions to COVID affected businesses. 

Here are some of the important regulatory updates.

Commerce & industry updates

Commerce & Industry Ministry press release dated 31.3.2020

https://pib.gov.in/PressReleseDetail.aspx?PRID=1609704

Few salient features

  • To provide continuity in the policy regime, the current Foreign Trade Policy, valid till 31.03.2020 has been extended till 31.03.2021. Similar extension is made in the related procedures, by extending validity of Hand Book of Procedures.

  • Benefit under all the Export Promotion Schemes (except SEIS) and other schemes, available as on date, will continue to be available for another 12 months. Decision on continuation of SEIS will be taken and notified subsequently.

  • Similarly, validity period of the Status Holder Certificates is also extended. This will enable the Status Holders to continue to avail the specified facilities/benefits.

  • Exemption from payment of IGST and Compensation Cess on the imports made underAdvance/EPCG Authorisations and by EOUs etc. has been extended up to 31.03.2021.

  • Validity period of Letter of Permission/ Letter of Intent as granted to EOUs, units in STPs/EHTPs/BTPs is further extended up to 31st December, 2020.

  • Extension in time has been allowed for filing various Reports/Returns etc. under various provisions of the FTP.

FEMA updates

RBI Press Release: 2019-2020/2167 dated 1.4.2020
https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=49619

Extension of realisation period of export proceeds

  • Presently value of the goods or software exports made by the exporters is required to be realized fully and repatriated to the country within a period of 9 months from the date of exports. In view of the disruption caused by the COVID-19 pandemic, the time period for realisation and repatriation of export proceeds for exports made up to or on July 31, 2020, has been extended to 15 months from the date of export. The measure will enable the exporters to realise their receipts, especially from COVID-19 affected countries within the extended period and also provide greater flexibility to the exporters to negotiate future export contracts with buyers abroad.

RBI notification: RBI/2019-20/186 DOR.No.BP.BC.47/21.04.048/2019-20 dated 27.3.2020

https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11835&Mode=0

Instructions to banks

Rescheduling of payments – Term loans and working capital facilities –

  • In respect of all term loans (including agricultural term loans, retail and crop loans), all commercial banks (including regional rural banks, small finance banks and local area banks), co-operative banks, all-India Financial Institutions, and NBFCs (including housing finance companies) (“lending institutions”) are permitted to grant a moratorium of three months on payment of all instalments falling due between March 1, 2020 and May 31, 2020. The repayment schedule for such loans as also the residual tenor, will be shifted across the board by three months after the moratorium period. Interest shall continue to accrue on the outstanding portion of the term loans during the moratorium period.

  • In respect of working capital facilities sanctioned in the form of cash credit/overdraft (“CC/OD”), lending institutions are permitted to defer the recovery of interest applied in respect of all such facilities during the period from March 1, 2020 up to May 31, 2020 (“deferment”). The accumulated accrued interest shall be recovered immediately after the completion of this period. 

Easing of working capital financing

  • In respect of working capital facilities sanctioned in the form of CC/OD to borrowers facing stress on account of the economic fallout of the pandemic, lending institutions may recalculate the ‘drawing power’ by reducing the margins and/or by reassessing the working capital cycle. This relief shall be available in respect of all such changes effected up to May 31, 2020 and shall be contingent on the lending institutions satisfying themselves that the same is necessitated on account of the economic fallout from COVID-19. Further, accounts provided relief under these instructions shall be subject to subsequent supervisory review with regard to their justifiability on account of the economic fallout from COVID-19.

Classification as special mention account (SMA) and non-performing asset (NPA)

  • Since the moratorium/deferment/recalculation of the ‘drawing power’ is being provided specifically to enable the borrowers to tide over economic fallout from COVID-19, the same will not be treated as concession or change in terms and conditions of loan agreements due to financial difficulty of the borrower under paragraph 2 of the Annex to the Reserve Bank of India (Prudential Framework for Resolution of Stressed Assets) Directions, 2019 dated June 7, 2019 (“Prudential Framework”). Consequently, such a measure, by itself, shall not result in asset classification downgrade.

  • The asset classification of term loans which are granted relief as per paragraph 2 shall be determined on the basis of revised due dates and the revised repayment schedule. Similarly, working capital facilities where relief is provided as per paragraph 3 above, the SMA and the out of order status shall be evaluated considering the application of accumulated interest immediately after the completion of the deferment period as well as the revised terms, as permitted in terms of paragraph 4 above.

  • The rescheduling of payments, including interest, will not qualify as a default for the purposes of supervisory reporting and reporting to Credit Information Companies (CICs) by the lending institutions. CICs shall ensure that the actions taken by lending institutions pursuant to the above announcements do not adversely impact the credit history of the beneficiaries.

Other conditions

  • Lending institutions shall frame Board approved polices for providing the abovementioned reliefs to all eligible borrowers, inter alia, including the objective criteria for considering reliefs under paragraph 4 above and disclosed in public domain.

  • Wherever the exposure of a lending institution to a borrower is ₹ 5 crore or above as on March 1, 2020, the bank shall develop an MIS on the reliefs provided to its borrowers which shall inter alia include borrower-wise and credit-facility wise information regarding the nature and amount of relief granted.

  • The instructions in this circular come into force with immediate effect. The Board of Directors and the key management personnel of the lending institutions shall ensure that the above instructions are properly communicated down the line in their respective organizations, and clear instructions are issued to their staff regarding their implementation.

SEBI Updates

Relaxation measures implemented by SEBI due to the COVID 19 virus pandemic

  • SEBI Circular No. SEBI/HO/CFD/CMD1/CIR/P/2020/38 Dated March 19, 2020

Compliance Relaxation of certain provisions of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 due to the COVID -19 virus pandemic.

https://www.sebi.gov.in/legal/circulars/mar-2020/relaxation-from-compliance-with-certain-provisions-of-the-sebi-listing-obligations-and-disclosure-requirements-regulations-2015-due-to-the-covid-19-virus-pandemic_46360.html

  • SEBI Circular No. SEBI/HO/DDHS/ON/P/2020/41 Dated March 23, 2020

Compliance relaxation of certain provisions of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and certain SEBI Circulars due to the CoVID -19 virus pandemic.

https://www.sebi.gov.in/legal/circulars/mar-2020/relaxation-from-compliance-with-certain-provisions-of-the-sebi-listing-obligations-and-disclosure-requirements-regulations-2015-and-certain-sebi-circulars-due-to-the-covid-19-virus-pandemic-cont-_46395.html

  • SEBI Circular No. SEBI/HO/CFD/CMD1/CIR/P/2020/48 Dated March 26, 2020

Further compliance relaxations of certain provisions of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR) and the SEBI circular dated January 22, 2020 relating to Standard Operating Procedure due to the COVID -19 virus pandemic.

https://www.sebi.gov.in/legal/circulars/mar-2020/further-relaxations-from-compliance-with-certain-provisions-of-the-sebi-listing-obligations-and-disclosure-requirements-regulations-2015-lodr-and-the-sebi-circular-dated-january-22-2020-relating-_46436.html

  • SEBI Circular No. SEBI/HO/CFD/DCR1/CIR/P/2020/49 Dated March 27, 2020

Compliance relaxation of certain provisions of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 due to the COVID-19 pandemic.

https://www.sebi.gov.in/legal/circulars/mar-2020/relaxation-from-compliance-with-certain-provisions-of-the-sast-regulations-2011-due-to-the-covid-19-pandemic_46442.html

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Makarand Lele

Expert Advisor and Consultant for SMEs on the platform, specially to address queries on the impact of COVID-19 on business owners in India<br /> <br /> Core...

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