RBI extends timelines to companies for compliance of debt recast

The corporate borrowers, whose loans were restructured under the first recast resolution plans under the RBI’s circular of 6 August 2020, can take another six months to achieve financial parameters laid down by the Reserve Bank of India.

RBI on Friday notified to defer the target date for companies by six months to October 1, 2022, in view of the resurgence of the Covid-19 pandemic in 2021 and recognising the difficulties it may pose for the borrowers in meeting the operational parameters,.

RBI on September 7, 2020, advised lenders to consider the key ratios and their sector-specific thresholds while finalising the resolution plans in respect of eligible borrowers as per the August 6, 2020 circular on Resolution Framework for Covid-19 related stress. The RBI circular of August 6 was issued conferring to the resolution plan recommended by the KV Kamath committee under the COVID-19 debt recast scheme.

According to RBI’s circular of 6 August 2020, borrowers were supposed to meet sector-specific thresholds in five financial parameters, four of which are related to the operational performance of the borrower. The key ratios consisted of four operational ratios, viz., Total Debt / EBITDA (EBITDA stands for earnings before interest, taxes, depreciation, and amortization), Current Ratio, Debt Service Coverage Ratio (DSCR), and Average Debt Service Coverage Ratio (ADSCR), along with the ratio Total Outside Liabilities / Adjusted Tangible Net Worth (TOL/ATNW) representing the debt-equity mix of the borrower post-implementation of the resolution plan.

The target date for achieving the ratio TOL/ATNW, as crystallised in terms of the resolution plan, shall remain unchanged, RBI said.