RBI forms committee to make recommendation in restructuring of loans

 It was said by Winston Churchill that “ Everything agreeable is unsound and everything sound is disagreeable in finance”.

For the restructuring of loans impacted by the Covid-19 pandemic, under the chairmanship of former ICIC Bank CEO K V Kamath, the Reserve Bank of India ( RBI) formed a five-member committee. Diwakar Gupta the former State Bank of India executive, and the current chairman of Canara Bank T N Manoharan,  Ashvin Parekh the consultant and the Sunil Mehta CEO of Indian Banks Association (IBA) who will be the secretary of the committee, these are the other members of the committee and it if it needs additional members to this committee it will add further.

As per the measures after the monetary policy that held on Thursday, it is announced that the committee will be restructuring of loans above Rs 1500 crore. The Governor Shaktikanta Das ordered to permit restructuring of loans to alleviate the COVID -19 as per the ink dries of Reserve bank of India ( RBI ). It is doubtful that it would be the panacea for the ills beyond COVID -19. It was the assumption that to recommend a list of financial parameters to be factored into each resolution plan, the sector-specific benchmark ranges for such parameters is the immediate task of the committee.

The aspect related to leverage liquidity, debt serviceability, etc will include in these parameters. It was submitted a list of financial parameters and the sector-specific desirable ranges for such parameters by the expert committee to the Reserve Bank, which will notify the same within 30 days along with the modification in returns. The two members of the committee are not joining immediately which shows that the committee will only include three people initially. The chairman of the Canara Bank will join only on August 14 and Diwakar Gupta the vice president of the Asian Development Bank will join only on September 1 the week before the deadline set before the committee ends.

Under this framework, the expert committee will also undertake the process validation as per the resolution plan that should be implemented under this framework and without going into the commercial aspect, with aggregate exposure of Rs 1500 crore in respect of all the accounts and above at the time of invocation. It was given the freedom by the committee to devise its procedures for its functioning.