Kamath Panel on loan restructuring identifies six problem industries

Mumbai: The KV Kamath committee, set to submit its report on loan restructuring to the Reserve Bank of India (RBI) on Friday, is said to have identified six problem sectors, among them aviation, real estate, automobiles, infrastructure and power, said people with knowledge of the matter. The committee has suggested solutions for 29 of the 307 sectors it assessed, they said.The RBI had tasked the committee with giving sector-specific recommendations following its announcement of a one-time loan recast for borrowers hit by the Covid-19 pandemic. The panel is also said to have suggested that the two-year cutoff for the restructuring will begin after implementation of the resolution plan. The RBI circular issued last month had stated that restructured loans could have easier repayment terms for a period of up to two years. The RBI is expected to announce the loan restructuring guidelines by September 6 once the governor and deputy governors examine the committee’s recommendations.Committee to Vet Resolution Plans“Several sectors were looked at and the silver lining is that the size of the problem is not as big as thought earlier,” said an official aware of the report’s thrust. “We looked at high-frequency indicators for July and August and found that a large chunk of standard assets are bouncing back. The telecom sector was a positive surprise while some players in aviation are doing well too.” 77922431Once the recommendations are finalised, bank boards will decide on resolution plans. The Kamath committee will further vet these plans for business loans above Rs 1,500 crore on aspects such as financial parameters, strength of promoters and their repayment capacity, said the people cited above.“While the bank boards will look at the viability of the resolution plan, the job of the committee is to vet that plan,” said one of the persons. “It won’t go into the feasibility of the resolution plan.”Axis Bank MD Amitabh Chaudhry had pointed out in a recent interview to ET that lenders have been given a timeframe for recast plans.“We have up to December to initiate a restructuring, then we have another 30 days to sign off on that restructuring and from December 31 we have six months to implement it,” Axis Bank managing director Amitabh Chaudhry had said in a recent interview to ET. “If you see how much time it would take for some of these borrowers to return to normalcy, it could take a couple of years, because it will take at least six-eight months to put the whole thing in place and then we need to give them some time to come back and start repaying us.” The central bank had stipulated this in its August 6 statement.“Resolution under this framework may be invoked not later than December 31, 2020, and must be implemented within 180 days from the date of invocation,” the central bank said.Apart from veteran banker Kamath, the other members of the committee are former State Bank of India managing director Diwakar Gupta, former Canara Bank chairman TN Manoharan, Indian Banks’ Association CEO Sunil Mehta and independent expert Ashvin Parekh.The committee sought inputs from 12 banks that constitute 65 per cent of the banking system as well as the top three rating agencies — Crisil, ICRA and CARE. The committee also looked at solvency ratios, liquidity parameters, profit margins, debt-servicing capability, risk on long-term loans and potential cash flows before arriving at its final set of recommendations.India Ratings has said at least Rs 2.1 lakh crore (1.9 per cent of banking credit) of retail loans, which could turn into NPAs, may undergo restructuring. On an overall basis, about Rs 8.4 lakh crore of total bank credit could be restructured, it said. The one-time resolution relief plan follows a six-month moratorium on loan repayments that ended August 31.

from Economic Times https://ift.tt/2Dw7iJM