TAPSTART POLICY ON RESTRUCTURING 2.0

Introduction:

Tapstart Capital Private Limited (hereinafter referred to as “Tapstart’ or ‘the Company’ or ‘we’ or ‘us’) is an RBI registered Non-systemically important Non-deposit taking Non-banking Financial company (NBFC-ND-NSI). It provides credit facilities to underserved middle and low income segment customers catering to different needs, including personal loans, credit lines, medical loans, education loans, consumer electronic loans, consumer lifestyle loans and two-wheeler loans. The Reserve Bank of India (RBI) vide its circular on Resolution Framework – 2.0: Resolution of Covid-19 related stress of Individuals and Small Businesses, dated May 05, 2021 (“RBI Circular”), has directed lending institutions including NBFCs to frame Board approved polices for providing the reliefs mentioned in the RBI Circular to all eligible borrowers. Earlier on June 7, 2019, the RBI had issued directions on Prudential Framework for Resolution of Stressed Assets commonly referred to as RBI (Prudential Framework for Resolution of Stressed Assets) Directions 2019 (“Prudential Framework”), which provides a principle-based resolution framework for addressing borrower defaults under a normal scenario. However, the economic fallout on account of the COVID-19 pandemic has led to significant financial stress for borrowers nationwide. Considering this situation, the RBI provided a window under the Prudential Framework and enabled the lenders to provide a resolution framework to the eligible borrowers for repayment of their loan by way of restructuring the loan or extending the tenure for repayment of the debt.

Definition:

For the purposes of this policy, the below terms shall have the meaning as provided hereinunder:

  1. Lending Institution: Tapstart Capital Private Limited/ the Company.
  2. Resolution/Policy: Restructuring Policy of the Company approved by the Board of Directors of the Company.
  3. Board: The Board shall mean the Board of Directors or any authorized committee(s) of the board of the Company.
  4. COVID-19: Coronavirus Disease or COVID-19 is an infectious disease, which was declared as a global pandemic by World Health Organization on 11 March 2020.
  5. Eligible Borrower/s: Eligible Borrowers shall mean:
    1. Individuals who have availed of personal loans (as defined in the CircularDBR.No.BP.BC.99/08.13.100/2017-18 dated January 4, 2018 on “XBRL Returns – Harmonization of Banking Statistics”), excluding the credit facilities provided by lending institutions to their own personnel/staff.
    2. Individuals who have availed of loans and advances for business purposes and to whom the lending institutions have aggregate exposure of not more than Rs. 50 crore as on March 31, 2021.
    3. Borrower, whose loan account was classified as Standard as on 31st March, 2021
  6. ENon-Eligible Borrower/s: Non-Eligible Borrowers shall mean the personnel or staff of the Company to whom it has extended credit facility or personal loans.
    Without prejudice to the exceptions specified in paragraphs 25-28 of the Prudential Framework, the following categories of borrowers / credit facilities shall not be eligible for a resolution plan 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 as listed in Paragraph 6.1 of Master Direction FIDD.CO.Plan.1/04.09.01/2016-17 dated July 7, 2016 (as updated) or other relevant instructions as applicable to specific category of lending institutions.
    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 of lending institutions to financial service providers.
    5. Exposures of lending institutions to Central and State Governments; Local Government bodies (eg. Municipal Corporations); and, body corporates established by an Act of Parliament or State Legislature.
    6. Exposures of housing finance companies where the account has been rescheduled in terms of para 2(1)(zc)(ii) of the Master Circular – The Housing Finance Companies (NHB) Directions, 2010 after March 1, 2020, unless a resolution plan under this framework has been invoked by other lending institutions. However, from the date of this circular, any resolution necessitated on account of the economic fallout of Covid19 pandemic, shall be undertaken only under this framework.

    Note:
    Loans of Borrowers where resolution plans had been implemented in terms of the Resolution Framework – 1.0, issued by RBI on 6th August, 2020, are eligible under this Policy provided where the resolution plans had permitted no moratoria or moratoria of less than two years and / or extension of residual tenor by a period of less than two years, the Company shall modify such plans only to the extent of increasing the period of moratorium / extension of residual tenor subject to the caps of other terms of the Policy, and the consequent make necessary changes in the terms of the loan for implementing such extension.

  7. Personal Loans: Loans given to individuals (to underserved middle and low income segment customers) catering to different needs, including credit lines, medical loans, education loans, consumer electronic loans, consumer lifestyle loans and two-wheeler loans.
  8. Date of Invocation: The date of invocation means the date on which both the borrower and lender have agreed to proceed with a resolution plan for the Eligible Borrower in terms of this Policy. However, in no case the Date of Invocation be later than September 30, 2021.
Eligibility for resolution under this Policy:

The Company shall ensure that the resolution under this facility is provided only to the borrowers having stress on account of Covid-19. The eligibility criteria of the borrowers in respect of whom the Company shall invoke this resolution are as follows:

  1. Only those borrower accounts shall be eligible for resolution under this framework which were classified as standard as on March 31, 2021;
  2. The resolution process under this window shall be treated as invoked when the Company and the borrower agree to proceed with the efforts towards finalising a resolution plan to be implemented ;
  3. The resolution plans implemented under this window may inter alia include rescheduling of payments, conversion of any interest accrued or to be accrued into another credit facility, revisions in working capital sanctions, granting of moratorium etc. based on an assessment of income streams of the borrower. However, compromise settlements are not permitted as a resolution plan for this purpose.
  4. The moratorium period, if granted, may be for a maximum of two years, and shall come into force immediately upon implementation of the resolution plan. The extension of the residual tenor of the loan facilities may also be granted to borrowers, with or without payment moratorium. The overall cap on extension of residual tenor, inclusive of moratorium period if any permitted, shall be two years.
Assessment Norms:

Only COVID-19 impacted borrowers (Financial/ medical impact) shall qualify for this resolution plan. Accordingly, any borrower facing financial stress on account of following shall be eligible for restructuring:

  1. on account of income/ employment uncertainty, or
  2. on account of impact on business, or
  3. health issues arising from COVID

Additionally, in respect of applications received from the customers for invoking resolution process under this window, the assessment of eligibility for resolution as per the instructions contained in this circular and the Board approved policy put in place as above shall be completed, and the decision on the application shall be communicated in writing to the applicant by the Company within 30 days of receipt of such applications

Timelines for resolution:

The resolution plan for the Eligible Borrower account under this Policy shall be invoked latest by September 30, 2021 and must be implemented within 90 (Ninety) days from the Date of Invocation.

Implementation of resolution (also known as “Date of Implementation”)

A restructuring of loan would be treated as implemented upon fulfilment of all of the following conditions:

  1. All related documentation, including execution of necessary agreement(s), if any, between Lender and Eligible Borrower are completed;
  2. The new loan amount and/ changes in the terms and conditions of the existing loan account get duly reflected in the books of accounts of the Lender
  3. The Eligible Borrower is not in default with the Lender as per the revised terms and conditions.

The resolution process under this window shall be treated as invoked when the lending institution and the borrower agree to proceed with the efforts towards finalising a resolution plan to be implemented in respect of such borrower. In respect of applications received by the lending institutions from their customers for invoking resolution process under this window, the assessment of eligibility for resolution as per the instructions contained in this circular and the Board approved policy put in place as above shall be completed, and the decision on the application shall be communicated in writing to the applicant by the lending institutions within 30 days of receipt of such applications.

Asset classification and provisioning:
  1. If a resolution plan is implemented in adherence to the provisions of the circular, the asset classification of borrowers’ accounts classified as Standard may be retained as such upon implementation, whereas the borrowers’ accounts which may have slipped into NPA between invocation and implementation may be upgraded as Standard, as on the date of implementation of the resolution plan.
  2. The subsequent asset classification for such exposures will be governed by the criteria laid out in the Master Circular - Prudential norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances dated July 1, 2015 or other relevant instructions as applicable to specific category of lending institutions (“extant IRAC norms”).
  3. In respect of borrowers where the resolution process has been invoked, lending institutions are permitted to sanction additional finance even before implementation of the plan in order to meet the interim liquidity requirements of the borrower. This facility of additional finance may be classified as ‘Standard’ till implementation of the plan regardless of the actual performance of the borrower in the interim. However, if the resolution plan is not implemented within the stipulated timelines, the asset classification of the additional finance sanctioned will be as per the actual performance of the borrower with respect to such additional finance or performance of the rest of the credit facilities, whichever is worse.
  4. The lending institutions shall keep provisions from the date of implementation, which are higher of the provisions held as per the extant IRAC norms immediately before implementation, or 10 percent of the renegotiated debt exposure of the lending institution post implementation (residual debt). Residual debt, for this purpose, will also include the portion of non-fund based facilities that may have devolved into fund based facilities after the date of implementation.
  5. Half of the above provisions may be written back upon the borrower paying at least 20 per cent of the residual debt without slipping into NPA post implementation of the plan, and the remaining half may be written back upon the borrower paying another 10 per cent of the residual debt without slipping into NPA subsequently. Provided that in respect of exposures other than personal loans, the above provisions shall not be written back before one year from the commencement of the first payment of interest or principal (whichever is later) on the credit facility with longest period of moratorium.
  6. The provisions required to be maintained under this window, to the extent not already reversed, shall be available for the provisioning requirements when any of the accounts, where a resolution plan had been implemented, is subsequently classified as NPA.
Reversal of Provisions:
  1. In case of personal loans resolved under this facility, half of the above provisions may be written back upon the borrower paying at least 20 per cent of the residual debt without slipping into NPA post implementation of the plan, and the remaining half may be written back upon the borrower paying another 10 per cent of the residual debt without slipping into NPA subsequently Provided that, in respect of exposures other than personal loans, the above provisions shall not be written back before one year from the commencement of the first payment of interest or principal (whichever is later) on the credit facility with longest period of moratorium.
  2. The provisions required to be maintained under this window, to the extent not already reversed, shall be available for the provisioning requirements when any of the accounts, where a resolution plan had been implemented, is subsequently classified as NPA.
Disclosures and Credit Reporting:
  1. Disclosure in the Financial Statement: The Company shall make appropriate disclosures about the restructured accounts in terms of this Policy in its annual financial statements under the “Notes to Accounts”.
  2. Credit Reporting by the Company: The credit bureau reporting by the Company in respect of borrowers where the resolution plan is implemented under this facility shall reflect the “restructured due to COVID-19” status of the account. The credit history of the borrowers shall consequently be governed by the respective policies of the credit information companies as applicable to accounts that are restructured.
    This Board approved policy has been sufficiently published and is available on the website of the lending institutions in an easily accessible manner.
Grievance Redressal

The Company shall address all grievances of the Borrowers who has applied for resolution under this window and/or who are undergoing resolution under this window. The customers can register/ lodge rievances via either of the following channels:

  1. E-mail – Customers can lodge complaints to the Company via email at hello@tapstart.in which will then be looked into by the Company’s operations/ back-end team internally.
  2. Post – Customers can submit their complaints/ concerns in writing by post to the Company:
    To,
    Customer Services Team
    Tapstart Capital Private Limited
    Unit No G408, 4th Floor, Gamma Block, Varthur Hobli, Sigma Soft Tech Park, No. 7,
    Whitefield Road Bangalore – 560066

If any such grievance is not addressed to the satisfaction of the borrower, the borrower can escalate the grievance to the Grievance Redressal Officer (‘GRO’). The details of the same is given herein:

Designation Grievance Redressal Officer
Name Kshama Kottachery
Contact No. +916366916645
Calls will be answered between 10.00 am to 7.00 pm on all working days of the Company.
Email id kshama@tapstart.in
Review/Amendment of the Policy

In case of any further clarifications issued by RBI in this regard from time to time, the same shall override / amend this policy as applicable.

In order to ensure immediate implementation keeping in view the importance of extending relief due to the impact of COVID 19, any further changes to this policy based on the notifications from the RBI in this regard, can be done with approval from MD and CEO ABFL, CRO. Any significant changes will be informed to the Board.

Download Restructuring Policy_2.0_1_06_2021