The Reserve Bank of India has released a framework for Resolution of COVID Related Stress for addressing borrower defaults during the COVID pandemic and related national lockdown.
Key Points for UPSC Prelims
- As per the framework, an Expert Committee would be constituted by RBI for making recommendations on financial parameters required to be studied while implementing the resolution framework.
- In view of the above, the RBI constituted a five-member committee under the chairmanship of former ICICI Bank Chief Executive KV Kamath.
- Other members of the committee were Canara Bank chairman TN Manoharan, former State Bank of India executive Diwakar Gupta, consultant Ashvin Parekh and Indian Banks’ Association (IBA) CEO Sunil Mehta.
- The committee made a detailed analysis and recommended that all lending institutions should mandatorily consider the 5 important financial ratios during COVID related restructuring of loans. Also, the committee recommended sector-specific ratios to be complied with by the financial institutions.
- The committee identified 26 sectors like real estate, power, iron, and steel, construction, roads, textiles, aviation, logistics, mining, hotels, consumer durables, wholesale trading, tourism, etc., and recommended sector-specific ratios for them.
- These recommendations have been accepted by the Reserve Bank of India and have been implemented.
Synergy of TLTRO with ECLGS
As announced earlier, the on-tap Targeted Long-Term Repo Operations (TLTRO) have been expanded to cover the stressed sector in synergy with the credit provided by ECLGS.
Emergency Credit Line Guarantee Scheme (ECLGS) is an emergency financial assistance introduced by the government of India for MSMEs and other business entities including health sectors. Under ECLGS banks provide loans to the entities.
What is TLTRO?
Targeted Long-Term Repo Operations (TLTRO) was launched by the government in October 2020 with an aim to increase liquidity in the market. It is operational till 31st March 2021.
