Policy for Restructuring 2.0 for Education
Loans & Small Businesses for
Covid-19 related stress
Education Loan, Personal Loans & Small Businesses (Non-MSME)
Salient features of the RBI circular as applicable for Loans to Individuals & Small Business (Non-MSME): –
Resolution plan under this circular can be sanctioned to borrowers who have availed Education
Loans, Personal loans & Loans for small Business (Non-MSME) having aggregate exposure
up to Rs. 50 Crore across Banks/NBFCs. However, if any education loan/Personal loan is
provided to own personnel/staff shall not be eligible for resolution under this framework
The borrower’s account shall be standard as on March 31, 2021.
The borrower’s account will continue to be classified as standard till the date of invocation of
resolution under this framework. (Date of invocation - date on which both the borrower and
lending institution have agreed to proceed with a resolution plan)
Resolution under this framework may be invoked not later than 30th September 2021 and must
be implemented within 90 days from the date of invocation.
The resolution plans may inter alia include rescheduling of payments, conversion of any interest
accrued, or to be accrued, into another credit facility, or, granting of moratorium, based on an
assessment of income streams of the borrower, subject to a maximum of two years.
Correspondingly, the overall tenor of the loan may also get modified commensurately. The
moratorium period, if granted, shall come into force immediately upon implementation of the
Eligible borrowers shall submit application in required format for resolution under the framework
and decision on the application shall be communicated in writing within 30 days.
The reference date for the outstanding amount of debt that may be considered for resolution
shall be March 31, 2021
Accounts already Restructured under Framework 1.0 earlier will only be considered only if
Resolution plan under 1.0 permitted no moratorium or moratorium of less than two years, and/or
Extension of residual tenor by less than two years
In such cases, permitted features of resolution plan shall include:
Increasing the Moratorium; or
Extension of residual tenor
The overall limit on moratorium and / or extension of residual tenor granted under Resolution
Framework – 1.0 and 2.0 combined, shall be two years.
A restructuring would be treated as implemented if the following conditions are met:
All related documentation, including execution of necessary agreements between
lenders and borrower / creation of security charge / perfection of securities are
completed or any other documentation mode as acceptable to Avanse Financial
Services Ltd; and
The changes in the terms and conditions of the existing loans get duly reflected in the
books of the lender and
The borrower is not in default with the lender as per the revised terms.
The resolution under this facility shall be extended only to borrowers having stress on account of COVID19
Asset Classification –
If a resolution plan is implemented in adherence to the provisions of this policy, 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 plan
Additional finance to borrowers in respect of whom the resolution plan has been
invoked, if sanctioned even before implementation of the plan in order to meet the
interim liquidity requirements of the borrower, may be classified as ‘standard asset’ till
implementation of the plan regardless of the actual performance of the borrower with
respect to such facilities 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 the additional finance or the rest of the
credit facilities, whichever is worse.
After implementation of the resolution plan in terms of this policy, the subsequent asset
classification will be governed by the provisions of RBI Master Direction dated
September 1, 2016.
Provisioning Norms –
The lender 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 lender post implementation
Any unreversed provisions maintained, if any, in terms of provisioning requirements of
RBI circular dated April 17, 2020 (i.e. Moratorium provisions) can be utilized for meeting
the provision requirements in all cases under this policy.
Any unreversed provisions maintained, if any, as per this policy shall be available for
meeting the provisioning requirements when any of the restructured accounts is
subsequently classified as NPA.
Reversal of Provisions – In case resolution is availed 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.
Any resolution plan implemented in breach of the above stipulated timeline shall be fully
governed by the Prudential Framework
Disclosures in Financial Statement:
Half-yearly disclosures shall be made as per prescribed format starting from March 31, 2022
(consisting of all restructured accounts during the reporting period). The said half yearly
disclosures shall be made till the time restructured exposures are extinguished or becomes
The credit reporting 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 if the resolution
plan involves renegotiations that would be classified as restructuring under the Prudential
All other instructions applicable to restructuring of loans shall continue to be applicable
General Conditions for considering Restructuring taken from master circular of RBI applicable
Restructuring of the advances shall comply with all the extant regulatory norms for
restructuring in force as notified by the RBI from time to time.
Existence of borrower's financial difficulty for economic or legal reasons, due to which
concessions to the Borrower are proposed, which otherwise would not have been considered.
Restructuring may involve modification of terms of the advances / securities, alteration of
repayment period / repayable amount / the amount of installments / rate of interest (due to
reasons other than competitive reasons).
Restructuring shall not be allowed with retrospective effect.
Restructuring cannot take place unless alteration / changes in the original loan agreement are
made with the formal consent / application of the debtor. The process of restructuring can be
initiated by AFSL in deserving cases subject to customer agreeing to the terms and conditions.
No account shall be taken up for restructuring unless the financial viability is established and
there is a reasonable certainty of repayment from the borrower, as per the terms of restructuring
No account shall be considered for restructuring without looking into cash flows of the borrower
and assessing the viability.
Borrowers indulging in frauds and malfeasance shall continue to remain ineligible for
ix. Loan accounts which are already assigned or securitized to other Banks or NBFCs by us prior
to April 01, 2021, shall be restructured (incl. change in loan sanction terms) with prior approval
on record of the respective Assignee of such loan accounts, and in accordance with the
respective contractual agreements and/or RBI guidelines.
Due diligence criteria, viability assessment and credit authority delegation:
Eligibility to consider a case under resolution:
Request from the relevant borrower shall explain the stress, which shall be only on account of
The Covid-19 stress shall have or resulted into adverse financial impact on the concerned
Covid-19 stress related any condition leading to temporary inability to repay the debts as per
the existing terms of the loan may be considered. However, there shall be a visibility or potential
of revival, if the resolution is granted. Some of the illustrations (but not limited to) of such impact
could be as below:
Finished their study but employment got delayed/impacted due to Covid-19
Earlier employed (full time/part time) but lost employment due to Covid-19
Employed (full time/part time) but salary got reduced or low salary due to Covid-19
Co-applicant/Parents employment/Business impacted by Covid-19
Any customer where financial stress is related to Covid-19
The above conditions shall be corroborated with the relevant material or reasonable explanation
to the satisfaction of Avanse.
Income & viability assessment (Indicative list):
In case, concerned borrower was/is a salaried class, at least 3 salary slips to be
collected (reflecting in the bank statement) of borrower/co-borrower
Future income of student can be considered based on fair assessment of post
qualification compensation from the respective university/college
Any past and/or existing record relating to income
Assessment of FOIR to be done
Assessment of financial stress in case borrower/co-borrower is a self employed person
Audited Financials for last two years or ITRs of last two years where financials are not
Debt profile along with status of moratorium and restructuring on other loans (if any)
Any document or business specific event having financial impact
Assessment of DSCR / FOIR to be done
Additional due diligence
Latest credit bureau report to be generated for all borrowers and co-borrowers
Monitoring of the restructured accounts
Repayment track of restructured accounts to be closely monitored.
In case of adverse observations on monitoring or delays in loan servicing post restructuring
beyond 30 days, recovery measures should be accelerated.
This policy is subject to periodic reviews basis business, legal and regulatory requirements. Any
changes identified as per the review, shall be carried out to this Policy with approval of CEO.
Base Lending Rate
We always aim to offer you competitive interest rates on your Avanse Education loan. The rate of interest on your loan is calculated as: Interest Rate = Avanse Base Rate + Spread.
Our current Base Rate is 13.15% (WEF 01.07.2022).
The Spread is floating and is based on analysis of overall credit and course profiling.
Rate of interest on student loan will be floating in nature.
Interest is calculated using Simple Interest Rate with Monthly rest.
This rate is subject to the terms and conditions of Avanse Financial Services Ltd.