TMI Blog2020 (4) TMI 190X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Regulatory Package shows that RBI has stipulated that the account which has been classified as SMA-2 cannot further be classified as a non-performing asset in case the instalment is not paid during the moratorium period i.e. between 01.03.2020 and 31.05.2020 and status quo qua the classification as SMA-2 shall have to be maintained. The effect of the same would be that for a period of three months there will be a moratorium from payment of that instalment. However, stipulated interest and penal charges shall continue to accrue on the outstanding payment even during the moratorium period. If post the moratorium period borrower fails to pay the said instalment, classification would then automatically change as per the IRAC guidelines. The classification of the account of the petitioner as an NPA on 31.03.2020 could not have been done by the respondent. Accordingly, status quo ante is restored qua the classification of the account of petitioner and the account classification as it stood on 01.03.2020 shall stand restored - Petitioner shall pay on or before 25.04.2020, the instalment which fell due as on 01.01.2020 along with interest accrued thereon till the date of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.2020 was not paid within 30 days, the account of the petitioner was classified as SMA-1 and thereafter since it was not paid within 60 days, the account was classified as SMA-2. 8. Further it is contended on behalf of the respondent that since the instalment was not paid till 31.03.2020, the account of the petitioner was liable to be classified as NPA. 9. It is submitted by learned counsel for the respondent that in terms of the IRAC Guidelines, particularly paragraph 4.2.2banks have to be put into place an automated system whereby the accounts are classified automatically by the system in the event of default as noticed hereinabove. 10. Learned counsel for the petitioner contends that in view of the pandemic COVID-19, RBI has issued several guidelines and advisories and brought into place regulatory polices to give benefit to the borrowers to easethe financial crisis. 11. Learned counsel for the petitioner relies on the Statement of Development Regulatory Policy dated 27.03.2020 wherein the object of the said policy issued by the RBI stated is to inter-alia ease the financial stress caused by COVID-19 disruptions by relaxing repayment pressures and improving access t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Account (SMA) and Non-Performing Asset(NPA) 5. 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 concessionor 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. 6. 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 it., 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. 7. The rescheduling of payments, including intere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement on Development and Regulatory Policies issued by RBI on 27th March, 2020 along with Regulatory Package issued on March 27, 2020 is applicable to the Respondent. 20. Reading of the Statement on Development and Regulatory Policies issued by RBI on 27th March, 2020 along with Regulatory Package issued on March 27, 2020 prima facie shows that the intention of the RBI is to maintain status quo as on 01.03.2020 with regard to the all the instalments payment for which had to be made post 01.03.2020 till 31.05.2020. 21. Paragraph 5 to 7 of the Regulatory Package with regard to Classification of Accounts also indicates that the intention of RBI is to maintain status quo with regard to the classification of accounts of the borrowers as they existed as on 01.03.2020. 22. As per the contention of the learned counsel for the respondent, prior to declaration of an account as NPA, the account has to go through the process of declaration as SMA-1 and SMA-2. 23. If a borrower was duly servicing the account until 01.03.2020 and no instalment was overdue, the borrower s account would have been classified as a Standard Asset, i.e., there being no default, which means that the account ..... X X X X Extracts X X X X X X X X Extracts X X X X
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