RBI constitutes a panel for Loan restructuring

The Reserve Bank of India has formed a five-member committee under the chairmanship of former ICICI Bank CEO KV Kamath to make recommendations regarding the financial parameters to be considered in the structuring of loans impacted by the COVID 19 pandemic.

Who all are there in the Committee?

Apart from the Chairman, other members of the committee are:

• Diwakar Gupta (SBI Executive)
• TN Manoharan (Canara Bank Chairman)
• Ashvin Parekh (Consultant)
• Sunil Mehta (IBA CEO)

More members may be added to the committee if required, at a later stage.

What will this committee do?

The committee is going to recommend a list of financial parameters to be factored into the assumptions that go into each resolution plan and the sector-specific issues also will be considered so that sector-specific guidelines are also framed by the committee. It will include various aspects such as leverage, liquidity, debt serviceability, etc. The committee will submit a list of financial parameters and the sector-specific desired ranges for such parameters for the restructuring of a credit facility.

What is Loan Restructuring?

It means altering the terms and conditions of a loan if the borrower is facing some genuine difficulty in repaying the same. The bank can decide regarding such cases on their merit. The loan period may be increased while doing this. During the COVID 19 pandemic, most of the business activities have stopped and RBI has already granted moratorium for all loan accounts in the country. The restructuring has also become necessary now because of the prevailing economic situation in the country.

Month: Current Affairs - August, 2020