Resolving stressed assets

The new package should not be used to kick the can down the road

The Reserve Bank of India (RBI) has accepted the recommendations of the expert committee constituted to suggest financial parameters for resolving bank loans affected by Covid-19. The committee, chaired by veteran banker K V Kamath, suggested a framework to deal with such loans in 26 sectors. This is an extraordinary situation in which the countrywide lockdown imposed by the government to contain the pandemic affected the revenues and the debt-servicing capability of a large number of firms in different sectors. Thus, it became important to support better-run firms and avoid unnecessary bankruptcies, which eventually would have affected the banking system.