The Reserve Bank of India (RBI) on September 7, 2020 specified five financial ratios and sector-specific thresholds for resolution of COVID-19-related stressed assets in 26 sectors.
- The circular issued by the Reserve Bank for resolution of the stressed assets is based on the recommendations of the K.V. Kamath Committee, which submitted its report on September 4, 2020.
- The 26 sectors specified by the RBI include automobiles, power, tourism, cement, chemicals, gems and jewellery, logistics, mining, manufacturing, real estate, and shipping among others.
- Five financial ratios need to be taken into account while deciding on a recast plan are:
1. Ttotal outstanding liabilities/ adjusted tangible net worth,
2. Total debt/Ebitda,
3. Current ratio,
4. Debt service coverage ratio,
5. Average debt service coverage ratio.
