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RBI defers target date for meeting thresholds under COVID debt recast scheme by 6 months

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In further relief to the stressed corporate sector, the RBI on Friday decided to defer the target date by six months to October 1, 2022, for meeting certain operational thresholds outlined by the KV Kamath committee under the COVID-19 debt-recast scheme announced last year. Kamath Committee on September 4, 2020, had recommended financial parameters to be factored in the resolution plans under the 'Resolution Framework for COVID-19-related Stress' along with sector-specific benchmark ranges for such parameters.

RBI defers target date for meeting thresholds under COVID debt recast scheme by 6 months
In further relief to the stressed corporate sector, the RBI on Friday decided to defer the target date by six months to October 1, 2022, for meeting certain operational thresholds outlined by the KV Kamath committee under the COVID-19 debt-recast scheme announced last year. Kamath Committee on September 4, 2020, had recommended financial parameters to be factored in the resolution plans under the 'Resolution Framework for COVID-19-related Stress' along with sector-specific benchmark ranges for such parameters.
The committee had recommended financial ratios for 26 sectors which has to be factored in by lending institutions while finalizing a resolution plan for a borrower. The financial aspects include those related to leverage, liquidity, debt serviceability. The resolution plans implemented under the Resolution Framework for COVID-19-related stress announced on August 6, 2020, require sector-specific thresholds to be met in respect of certain financial parameters.
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"Of these parameters, the thresholds in respect of four parameters relate to the operational performance of the borrowing entities, viz. Total Debt to EBIDTA ratio, Current Ratio, Debt Service Coverage Ratio and Average Debt Service Coverage Ratio," RBI Governor Shaktikanta Das said while announcing the third bi-monthly monetary policy review. These ratios are required to be met by March 31, 2022.
"Recognizing the adverse impact of the second wave of COVID-19 and the resultant difficulties on the revival of businesses and in meeting the operational parameters, it has been decided to defer the target date for meeting the specified thresholds in respect of the above four parameters to October 1, 2022," he said.
The 26 sectors specified by the Reserve Bank of India (RBI) include automobiles, power, tourism, cement, chemicals, gems and jewellery, logistics, mining, manufacturing, real estate, and shipping among others.
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