Mumbai, September 8: The Reserve Bank of India specified five sector-specific threshold and financial ratios for a resolution to gauge the health of sectors facing difficulties amid COVID-19 pandemic. The specification was issued after five-member panel -- led by KV Kamath -- submitted a reported to the apex bank on debt recast rules.

As per the details, the Committee has recommended financial ratios for 26 sectors, including auto components, up to the dealership, auto manufacturing, aviation, building materials, cement, construction among others. Apart from these, sectors like corp retail outlets, gems & jewellery, hotels-restaurants-tourism, consumer durables/FMCG, mining, on ferrous metals, pharma manufacturing, power, port, real estate, roads, among others are also included. RBI Announces Open Market Operation for Sale, Purchase of Govt Securities of Rs 10,000 Crore.

Here are key points of KV Kamath Committee recommendations:

1) All lending in institutions/agencies should mandatorily keep 5 key ratios in mind while framing resolution plans.

2) The 5 key ratios are -- total outstanding liabilities/adjusted tangible net worth, total debt/EBITDA, Current Ratio, Debt Service Coverage Ratio, and average debt service coverage ratio.

3) Financial institutions will be free to adopt a graded approach depending on the severity of the impact on the borrowers.

4) Lenders shall be allowed to make their own assessment for sectors where ratios have not been specified. However, they will have to keep in mind August 6 and September 7 circulars, issued by RBI.

5) Accepting most of the recommendations, RBI stated, "All other key ratios shall have to be maintained as per the resolution plan by 31 March 2022 and on an ongoing basis thereafter."

Earlier, RBI announced to form the expert committee led by ICICI bank CEO KV Kamath, former State Bank of India executive Diwakar Gupta, current Canara Bank chairman TN Manoharan, consultant Ashvin Parekh and Indian Banks' Association (IBA) CEO Sunil Mehta.

(The above story first appeared on LatestLY on Sep 08, 2020 01:06 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website