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Lays down financial parameters for approving restructuring plan across 26 sectors.
The Reserve Bank of India earlier announced a resolution framework for accounts adversely impacted by Covid-19 in a circular released on 6th Aug'20. The RBI subsequently formed an expert committee led by K.V. Kamath to suggest a list of financial parameters to be factored in the assumptions of the resolution plan and validate the resolution plan for all accounts above Rs 1,500 crore.
Accordingly, the expert committee identified 26 sectors that have been impacted by Covid-19 with varying severity – mild, moderate, and severe. It also suggested financial parameters based on leverage, liquidity, and the debt serviceability of the company. The committee thus identified five key ratios with different limits across sectors to be used as the threshold in implementing a resolution plan.
The expert committee suggested that ~ Rs 38 lakh crore of Banking sector debt comprises sectors affected by Covid-19, thus forming 37% of the total banking system debt. Among banks, total exposure toward the key troubled sectors forms 15–31% of the total fund-based exposure.
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