‘Key financial ratios prescribed by Kamath panel intended to be floors or ceilings’
The Reserve Bank on Monday 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. The circular issued by the RBI for resolution of stressed assets is based on the recommendations of the K.V. Kamath committee, which submitted its report on September 4. “The recommendations of the Committee have been broadly accepted by the Reserve Bank,” RBI said in a release. The key financial ratios suggested by the committee are total outside liabilities/adjusted tangible networth; total debt/EBITDA; current ratio, which is current assets divided by current liabilities; debt service coverage ratio; and average debt service coverage ratio. Specified sectorsThe 26 sectors specified by the RBI include automobiles, power, tourism, cement, chemicals, gems and jewellery, logistics, mining, manufacturing, real estate, and shipping among others.The RBI said the ratios prescribed “are intended as floors or ceilings, as the case may be, but the resolution plans shall take into account the pre-COVID-19 operating and financial performance of the borrower and impact of COVID-19 on its operating and financial performance at the time of finalising the resolution plan, to assess the cashflows in subsequent years, while stipulating appropriate ratios in each case.” It also said lending institutions may, at their discretion, adopt a graded approach depending on the severity of the impact on borrowers while implementing the resolution plan.
You have reached your limit for free articles this month.
To get full access, please subscribe.
Already have an account ? Sign in
Show Less Plan
Subscription Benefits Include
Find mobile-friendly version of articles from the day’s newspaper in one easy-to-read list.
Move smoothly between articles as our pages load instantly.
Enjoy reading as many articles as you wish without any limitations.
A one-stop-shop for seeing the latest updates, and managing your preferences.
A select list of articles that match your interests and tastes.
We brief you on the latest and most important developments, three times a day.
*Our Digital Subscription plans do not currently include the e-paper ,crossword, iPhone, iPad mobile applications and print. Our plans enhance your reading experience.
A letter from the Editor
Dear subscriber,Thank you!Your support for our journalism is invaluable. It’s a support for truth and fairness in journalism. It has helped us keep apace with events and happenings.The Hindu has always stood for journalism that is in the public interest. At this difficult time, it becomes even more important that we have access to information that has a bearing on our health and well-being, our lives, and livelihoods. As a subscriber, you are not only a beneficiary of our work but also its enabler.We also reiterate here the promise that our team of reporters, copy editors, fact-checkers, designers, and photographers will deliver quality journalism that stays away from vested interest and political propaganda.Suresh Nambath