NEW DELHI: The Reserve Bank of India (RBI) on Friday decided to extend the target date by 6 months to October 1, 2022 for meeting certain operational thresholds sketched out by the K V Kamath committee under the COVID debt-recast scheme announced in 2020. Kamath Committee on September 4, 2020 had recommended financial ratios for 26 sectors which have to be factored by lending institutions while finalizing a resolution plan for a borrower. The financial aspects include those related to leverage, liquidity, debt serviceability. At this point, the RBI said that “Recognising the adverse impact of second wave of COVID-19 on revival of businesses, and the difficulty it may pose in meeting the operational parameters, it has been decided to defer the target date for meeting the specified thresholds in respect of the above parameters to October 1, 2022.”

The resolution plans put into action under the Resolution Framework for COVID-related troubles announced on August 6, 2020 are required to meet 5 financial parameters, 4 of which are related to the operational performance of the borrowing entity. These include total debt to EBIDTA, current ratio, debt service coverage ratio, and average debt service coverage ratio.
 

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