Stringent Kamath panel suggestions – not many firms can avail of RBI debt recast

Mumbai: The much-awaited loan restructuring guidelines announced by the Reserve Bank of India, based on the recommendations of the expert panel headed by veteran banker K.V. Kamath, are being seen as “stringent”, as most stressed firms may not be able to avail of the facility.

The committee noted that the Covid-19 pandemic has resulted in the stress across sectors with varying intensity — mild, moderate and severe. The panel identified 26 such sectors and suggested five financial parameters that should be taken into account by the lenders for debt restructuring.

But financial experts and brokerage firms say the parameters, such as a debt service coverage ratio (DSCR) of 1 or above, and a requirement for investment grade or ‘RP4’ rating, will keep many firms out of the ambit of debt recast.

The Kamath committee submitted its report to the RBI on 4 September, and its recommendations were accepted in totality and announced within one working day. With economic growth falling to a record 23.9 per cent in the first quarter of financial year 2020-21, a debt recast assumed significance as the aim was to bring companies out of stress with some hand-holding.