Sri K V Kamath Committee Report – Decoded

September 26, 2020

Debt Serviceability

On September 4, the K V Kamath committee appointed by the RBI to look into the stress of Corporates following the COVID-19 Pandemic came up with their recommendations. If you see the vital parameters of the Indian economy following COVID-19, our economy was in pretty bad shape, down by 23.9% during the First Quarter of FY 2020-2021 and the Debt recast assumed significance with the aim of supporting the Corporates & Small businesses to come out of stress.

The committee noted that the stress resulted in varying degrees of Pain cutting across various sectors. The KV Kamath Committee along with Members Ashwin Parekh, Divakar Gupta, CA T N Manoharan, & Sunil Mehta recommended five financial ratios for the Stressed 26 sectors for lenders to consider while finalizing resolution plans.

The five ratios listed by the committee are:

Total Outside Liability/Adjusted Tangible Net Worth,
Total Debt/EBITDA,
Current Ratio of 1
Debt Service Coverage Ratio of 1.2
Average Debt Service Coverage Ratio

Who is eligible for Debt Restructuring?

If we analyze the sectors Severely Impacted by COVID 19, they can be briefly summarized as per the charts depicted below.

The sectors Less Impacted by the pandemic were.

Now if you want to draw a comparison of Banks Stressed portfolio to the Industrial sector before Pre & Post Covid-19 Situations, then the situation is as per the below Pie-Chart.

Industry wise Stress Post Covid-19 in the Banking Sector can be briefly summarized as per the below Chart.

Technically Speaking a Current Ratio of 1 & Debt Service Coverage Ratio (DSCR) of 1.2 has the following internal meaning that is it means the cash flow of the borrowers needs to be more than what is required to service their Debt. Experts say as a result, not many companies will be eligible for loan restructuring and added to that you should have a credit rating of “RP4” which indicates “Investment Grade” Rating which will keep many companies out of the ambit of Debt restructuring criteria. Banks also have the option to offer Debt recast to a company which is not part of these 26 sectors, but should have a Board-approved plan for such cases.

How to go around with the proposed recommendations of the committee? The Debt should have been classified as Standard as on 01-03-2020. Implementation of resolution plan requires ICA (Inter Creditor Agreement) amongst all the multiple lenders, the resolution plan will be invoked before December 31, 2020 and will be implemented 180 days before the date of invocation. The process has to be approved by lenders* with 75% in value and 60% in numbers. Lenders signing ICA will have to make a 10% provision and non-signing lenders at 20% (akin to Hair-cut like situation), the restructuring can be done by extending the residual tenor of the Debt up to maximum of Two years (24 Months) with or without Moratorium and may include the option of converting Debt/Loan in to Equity. Any Default by the borrower with any of the lenders who have signed the ICA during the monitoring period would trigger a review period of 30 Days and if the borrower remains in default at the end of the period all lenders will downgrade the account as Non-Performing Assets (NPA).

*Lenders can be a consortium / Loan Syndicate / Lead Bank / Lead Financial Institution.

Ratios In Brief:

Current Ratio = Current Assets / Current Liabilities > = 1
Debt Service Coverage Ratio=Net Operating Income /Annual Debt Service > =1.2




By CA Ranganatha Achar Krishna
To submit your article / poem / short story to Daijiworld, please email it to mentioning 'Article/poem submission for daijiworld' in the subject line. Please note the following:

  • The article / poem / short story should be original and previously unpublished in other websites except in the personal blog of the author. We will cross-check the originality of the article, and if found to be copied from another source in whole or in parts without appropriate acknowledgment, the submission will be rejected.
  • The author of the poem / article / short story should include a brief self-introduction limited to 500 characters and his/her recent picture (optional). Pictures relevant to the article may also be sent (optional), provided they are not bound by copyright. Travelogues should be sent along with relevant pictures not sourced from the Internet. Travelogues without relevant pictures will be rejected.
  • In case of a short story / article, the write-up should be at least one-and-a-half pages in word document in Times New Roman font 12 (or, about 700-800 words). Contributors are requested to keep their write-ups limited to a maximum of four pages. Longer write-ups may be sent in parts to publish in installments. Each installment should be sent within a week of the previous installment. A single poem sent for publication should be at least 3/4th of a page in length. Multiple short poems may be submitted for single publication.
  • All submissions should be in Microsoft Word format or text file. Pictures should not be larger than 1000 pixels in width, and of good resolution. Pictures should be attached separately in the mail and may be numbered if the author wants them to be placed in order.
  • Submission of the article / poem / short story does not automatically entail that it would be published. Daijiworld editors will examine each submission and decide on its acceptance/rejection purely based on merit.
  • Daijiworld reserves the right to edit the submission if necessary for grammar and spelling, without compromising on the author's tone and message.
  • Daijiworld reserves the right to reject submissions without prior notice. Mails/calls on the status of the submission will not be entertained. Contributors are requested to be patient.
  • The article / poem / short story should not be targeted directly or indirectly at any individual/group/community. Daijiworld will not assume responsibility for factual errors in the submission.
  • Once accepted, the article / poem / short story will be published as and when we have space. Publication may take up to four weeks from the date of submission of the write-up, depending on the number of submissions we receive. No author will be published twice in succession or twice within a fortnight.
  • Time-bound articles (example, on Mother's Day) should be sent at least a week in advance. Please specify the occasion as well as the date on which you would like it published while sending the write-up.

Leave a Comment

Title: Sri K V Kamath Committee Report – Decoded

You have 2000 characters left.


Please write your correct name and email address. Kindly do not post any personal, abusive, defamatory, infringing, obscene, indecent, discriminatory or unlawful or similar comments. will not be responsible for any defamatory message posted under this article.

Please note that sending false messages to insult, defame, intimidate, mislead or deceive people or to intentionally cause public disorder is punishable under law. It is obligatory on Daijiworld to provide the IP address and other details of senders of such comments, to the authority concerned upon request.

Hence, sending offensive comments using daijiworld will be purely at your own risk, and in no way will be held responsible.