KV Kamath Committee
The KV Kamath Committee on loan restructuring submitted its report and recommendations to the RBI. It recommends graded approach to restructuring of stressed accounts affected by the pandemic.
• RBI had formed a five-member committee under the chairmanship of former ICICI Bank CEO KV Kamath to make recommendations on the financial parameters to be considered for the one-time restructuring of loans impacted by the Covid 19 pandemic.
• In line with the mandate given by the RBI, Kamath committee has identified four financial parameters to adjusted tangible networth:
o Total outside liabilities
o Total Debt to EBITDA, (Earnings Before Interest, Taxes, Depreciation, and Amortization)
o Debt Service Coverage Ratio (DSCR),
o Average Debt Service Coverage Ratio (ADSCR).
• The committee will scrutinise restructuring of loans above ₹1500 crore. The resolution under this framework is applicable only to those borrowers who have been impacted on account of Covid. Only those borrowers which were classified as standard and with arrears less than 30 days as at March 1, 2020 are eligible under the Framework
• The sector-specific thresholds (ceilings or floors, as the case may be) for each of the above key ratios that should be considered by the lending institutions in the resolution assumptions with respect to an eligible borrower.
• The committee has therefore identified 26 sectors and also recommended sector specific thresholds for these sectors.
• In its report the five-member committee said power, construction, iron and steel, roads, real estate, wholesale trading, textiles, consumer durables, aviation, logistics, hotels, restaurants and tourism, mining are among the sectors that will need restructuring.
• According to RBI, the resolution framework may be invoked not later than December 31, 2020 and the plan needs to be implemented within 180 days from the date of invocation.
PEPPER IT WITH
New Developmental Bank, Asian Infrastructure Bank, Atmanirbhar Package, Debt Restructuring.