RBI Considers KV Kamath Committee Report on Loan Restructuring Amid COVID-19 Stress

Bleeding Age: For Entrepreneurs
2 min readSep 8, 2020



The Reserve Bank of India, on Monday, released a report submitted by the KV Kamath Committee enlisting the financial parameters for the restructuring of loans. Headed by KV Kamath, the former ICICI Bank Chief Executive; the panel identified 26 sectors that need loan restructuring post-COVID. Power, construction, iron and steel, roads, real estate, wholesale trading, textiles, aviation, hotels, restaurants and tourism, and mining are among the 26 sectors suggested by the committee that needs a resolution framework.

The pre-COVID financial operation and performance of the firm and the effect of the pandemic on the borrower’s firm will be accessed under the resolution framework. Financial aspects relating to leverage, liquidity, and debt serviceability would also be considered.

According to RBI, the five financial parameters to be accessed by the lenders include total outstanding liability divided by adjusted net worth, total debt divided by EBITDA, debt service coverage ratio (DSCR), average DSCR, and current ratio. The panel suggested specific benchmarks for the sectors, easing the decision of the lenders. The committee has also prescribed the current ratio for specific sectors like aviation while suggesting project level entity for real estate.

The suggestion of the committee aims to help companies to reach pre-COVID levels. The committee is also expected to improve the transparency of the loan restructuring system, to inspect loans above Rs 1500 crore. RBI will monitor the resolution plans aiming to access the stress caused by the pandemic categorizing them as mild, moderate, and severe. All moves to revamp several norms relating to loans during a time when Indian GDP has contracted at an alarming rate are welcomed across boards. The KV Kamath committee’s term has been extended till 30th June 2021.