The RBI specified five financial ratios and sector-specific thresholds for resolution of COVID-19-related stressed assets in 26 sectors, including auto components, aviation and tourism.
Key takeaways
The circular issued for resolution of the stressed assets is based on the recommendations of the K.V. Kamath Committee.
The 26 sectors include automobiles, power, tourism, cement, chemicals, gems and jewellery, logistics, mining, manufacturing, real estate, and shipping among others.
Five financial metrics need to be taken into account while deciding on a recast plan: (a) total outstanding liabilities/ adjusted tangible net worth, (b) total debt/Ebitda, (c) current ratio, (d) debt service coverage ratio, and (e) average debt service coverage ratio.
For each of these parameters, RBI has prescribed either a floor or a ceiling.
The committee has set 180 days to implement the plan and make an inter creditor agreement (ICA) mandatory.
The tenure of a loan may be extended by a maximum of two years, with or without a moratorium.
The resolution process shall be treated as invoked once lenders representing 75% by value and 60% by number agree to invoke the same.
