What is KV Kamath Committee by RBI?
The Reserve Bank of India (RBI) has constituted a 5 member expert committee under the Chairmanship of KV Kamath, former CEO of ICICI Bank. The committee will suggest parameters to cope up with the COVID-19 related stressed assets. The recommendations will be submitted by the committee to the central bank, and the bank will notify the same along with changes (if any) in 30 days.
As per a statement by RBI, 'The expert committee shall also undertake the process validation for the resolution plans to be implemented under this framework, without going into the commercial aspects, in respect of all accounts with aggregate exposure of ₹1,500 crores and above at the time of invocation'.
The statement further added that the Committee shall submit its recommendations on the financial parameters to the Reserve Bank which, in turn, shall notify the same along with modifications, if any, in 30 days.
Members of the committee
KV Kamath will be the chairman of the committee and the members will be-- Diwakar Gupta (effective September 1, 2020, after the completion of his term as Vice President, ADB), TN Manoharan (effective August 14, 2020, after the completion of his term as Chairman, Canara Bank), Ashvin Parekh (Strategy Advisor) and Sunil Mehta (CEO of Indian Banks’ Association, as the Member Secretary). As per RBI, more members may be added, if required. Also, two members will be joining the committee late, which means that it will initially have three people.
On August 6, 2020, RBI released a statement on Developmental and Regulatory Policies along with the Monetary Policies, stating that it will formulate a ‘Resolution Framework for Covid-19 related Stress’.
The task of the committee
As announced earlier, the committee will vet restructuring of loans of more than Rs 1500 crore. The committee will also recommend a list of financial parameters-- liquidity, debt serviceability and more-- to be included in each resolution plan and the sector-specific benchmark ranges for them. The recommendations will be submitted to the RBI, which in turn, will notify the same with modifications if any.
It is interesting to note that only those borrowers will be eligible under this framework who were classified as standard, but not in default for more than 30 days with any lending institution as on March 1, 2020.