Reserve Bank of India (RBI) has issued final guidelines for the restructuring of COVID-19-impacted corporate loans based on the recommendations of the KV Kamath committee. Kunal Shah of ICICI Securities and Rohan Mandora of Equirus Securities shared their views and outlook.
“Overall yesterday in terms of the expert committee report which has come out, they have identified 26 sectors wherein they have suggested the financial parameters and the threshold ranges within reach of these sectors. We believe that these 26 sectors account for more than 25 percent of the bank credit and the threshold ranges which have been defined, they are also reasonably comfortable than the sectoral averages across various financial parameters be it with respect to leverage, liquidity or serviceability barring few of the industries which were already reeling under stress. So to that extent it suggests that for lenders are willing to go ahead with the restructuring, this report or the thresholds which have been suggested, they would be more facilitative in terms of the approach rather than being restrictive. We have analysed 1,100 companies and looked at the various sectoral averages and that is where we are drawing this comfort from,” said Shah.
RBI has been proactive in this restructuring cycle, said Equirus’ Mandora.
“The threshold which have been mentioned are pretty facilitative. One key positive that we see in this restructuring cycle is that RBI has been pretty proactive in ensuring that only those accounts which have been impacted by COVID are able to get the benefit of restructuring,” said Mandora.
“In this cycle except for certain specific sectors like real estate, on a broader sense the mid-corporate is a space where we could see slightly higher pain vis-à-vis the large corporates unlike in the previous cycle,” Mandora added.
“When we broadly look at this threshold limit and then compare the sectoral averages, most of them barring two-three sectors are falling within the range,” Shah further mentioned.
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