The Reserve Bank of India (RBI) on Friday named four members to the KV Kamath committee which will work on the details of the one-time debt restructuring plan for individuals and companies having stressed accounts because of Covid-19. The debt recast plan will be introduced as soon as the loan moratorium ends on August 31.

Two of the four members chosen to the Kamath panel — Diwakar Gupta, vice-president of the Asian Development Bank, and Canara Bank chairman T.N. Manoharan — will join the panel after they finish their current assignments.

While Gupta will join on September 1 after his tenure at the ADB ends, Manoharan will join earlier on August 14 after he completes his term as chairman of Canara Bank. The other two members are Ashvin Parekh, managing partner at Ashvin Parekh Advisory Services, who will be the strategy adviser; and Sunil Mehta, CEO of the Indian Banks’ Association, will be the member secretary.

The panel will submit its recommendations to the central bank, which may make some modifications and notify the recommendations within a month.

The RBI on Thursday announced a debt recast plan for individuals and firms that have turned defaulters on account of Covid-19, which will be based on the norms of its resolution plans for stressed assets released in June last year, called the Prudential Framework on Resolution of Stressed Assets issued on June 7, 2019.

The panel will set the financial parameters for the resolution of the stressed assets. The recast panel will also undertake the process validation for the resolution plans in respect of all accounts with an aggregate exposure of Rs 1,500 crore and above at the time of invocation.

Covid-related stress

The RBI has said lending institutions should ensure the resolution under the one-time facility is extended only to borrowers facing stress in their accounts because of Covid-19.

Accounts which do not fulfil the required eligibility conditions may be considered for resolution under the prudential mechanism of June 2019.

On personal advances, the RBI said only those borrower accounts shall be eligible for resolution that were classified as standard but not in default for more than 30 days with the lending institution as on March 1, 2020.

A resolution should be invoked not later than December 31, 2020 and must be implemented within 90 days from the date of invocation.

For the other borrowers, the RBI had said if there are multiple lending institutions with exposure to the borrower, the resolution process shall be treated as invoked if the institutions representing 75 per cent by value of the total outstanding credit facilities and not less than 60 per cent of lenders by number agree to the exercise.