Current Context: The Reserve Bank of India has released a report framed by the committee which is led by K V Kamath.
- The committee has suggested and recommended financial parameters which focusses on resolutions plans under the ‘Resolution Framework for COVID 19 related Stress’.
- As per the report, the committee has selected 26 sectors which require reconstructing. These 26 sectors are selected based on its analysis of various financial parameters which are affected economically due to COVID-19.
- The sectors which are selected by the committee are: Power, Construction, Iron and Steel Manufacturing, Roads, Real Estates, Trading Wholesale, Textiles, Chemicals, Consumer Durables, Nonferrous metals, Pharma Manufacturing, Logistics, Gems and Jwellery, Cement, Automobile components, Hotel/Restaurants/Tourism, Mining, Plastic Product Manufacturing, Auto dealership, Aviation, Sugar, Shipping , Port and Port related services, Building materials and Corporate retail outlets.
- The K V Kamath committee has recommended financial ratios for these 26 sectors which could be factored by lending institutions while finalizing resolution plan for a borrower. The financial aspects are related to leverage, liquidity and debt serviceability. These financial aspects will be considered to decide on resolution plan.
- The lenders are mandated to consider parameters like: Total outstanding liabilities/adjustable tangible net worth, total debt/EBITDA, Current ratio, Debt Service Coverage Ratio and Average debt service coverage ratio.
- Other recommendations of the panel are: (a) Debt coverage ratio should be one and above. (b)Banks should take into consideration pre-covid financial state of the company and impacts of COVID on it in order to frame a recast plan (c) Inter-creditor agreement has been made compulsory in all the cases which involves multiple lending institutions.
- Static Part:
- HQ of RBI: Mumbai
- Governor of RBI: Shaktikanta Das
