Kamath panel races against time to meet Sept 6 deadline amid Covid-19

The Kamath panel constituted by the Reserve Bank of India to advise on debt restructuring of corporate borrowers facing stress due to the pandemic is racing against time to meet the September 6 deadline.

Senior bankers working closely with the committee said all panel members are on board and are actively participating in deliberations. Several meetings have already been held and on quite a few days, they are meeting informally for even three-four times in a day. At least one member — Diwakar Gupta — will join the committee after completion of his tenure at Asian Development Bank (ADB) on September 1. But he is also joining the deliberations informally.

The panel, sources said, has already set up working groups comprising bankers from private as well as public sector banks. The committee can draw data and resources including people from banks for which Indian Banks’ Association (IBA) is providing assistance.  These working groups have been tasked to look at sectoral framework. Many industry associations have given their inputs and some business conglomerates would also make presentation to panel, bankers said.

The committee will look into business loans exceeding Rs 1,500 crore, while resolution of retail loans will be taken care of by individual bank boards. The panel will flesh out industry-specific parameters to ensure genuine cases come up and get prompt support.  

Besides Kamath and Gupta, the other committee members are T N Manoharan, chartered accountant and former chairman of Canara Bank, Ashvin Parekh, Strategy Advisor, and Chief Executive, Indian Banks’ Association, as the member-secretary. Sunil Mehta is at present CEO of IBA, the banking industry lobby group.

The panel will recommend a list of financial parameters which should be factored into the assumptions that go into each resolution plan. The parameters will cover aspects related to leverage, liquidity, debt serviceability etc.

According to India Ratings, banks may restructure loans worth Rs 8.4 trillion to manage the financial stress caused by the Covid-19 pandemic. These loans include corporate accounts, where Rs 6.3 trillion of credit may be recast.

Nearly 53 per cent of the Rs 6.3 trillion is at high risk of being restructured or turning into slippages, while the remaining 47 per cent is at a moderate risk. The progress on these accounts will depend how the Covid-19 situation unfolds.

A high proportion of the debt from the real estate, airlines, hotels and other consumer discretionary sectors is likely to be restructured. The largest contribution would be from infrastructure, power and construction, it added.