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Expert committee for Stressed Assets

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    11th Aug, 2020
  • Recently RBI set up an expert committee under K V Kamath to suggest financial parameters for resolution of covid-19 related stressed assets.
  • Resolution Framework for Covid-19-related Stress envisages to make recommendations on the required financial parameters to be factored in into the resolution plans, with sector-specific benchmark.
  • Assets of the banking system comprises of loans given and investment (in bonds) made by banks.
  • Quality of the asset indicates how much of the loans taken by the borrowers are repaid in the form of interests and principal.
  • Stressed assets = NPAs + Restructured loans + Written off assets
  • NPA - means interest or principal is not repaid by the borrower during a specified time period (‘overdue’ for a period of 90 days.)
  • Bad assets are further classified into substandard asset, doubtful asset, and loss assets depending upon how long a loan remains as an NPA.
  • Restructured loans - Assets which got an extended repayment period, reduced interest rate, converting a part of the loan into equity, providing additional financing, or some combination of these measures.
  • Written off Assets - Those the bank or lender doesn’t count the money borrower owes to it.
  • The financial statement of the bank will indicate that the written off loans are compensated through some other way.