RBI Sets Debt Recast Rules for Pandemic-Hit Indian Companies

Lenders will have to consider financial parameters such as liquidity and debt-servicing ratios while preparing a restructuring plan for loan accounts that have turned bad due to the coronavirus pandemic, the Reserve Bank of India said following the recommendations of an external panel, Bloomberg News reported. The central bank identified 26 sectors affected by the pandemic such as auto, aviation and tourism, which can be offered a resolution subject to criteria including debt-coverage ratio, outstanding liabilities and net worth at pre-Covid levels. “The compliance in regard to meeting the agreed ratios must be monitored as financial covenants on an ongoing basis, and during subsequent credit reviews,” the RBI said in a statement. “Any such breach not rectified within a reasonable period, in terms of the loan contract, will be considered as financial difficulty.” Read more

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