Expert committee for Stressed Assets
- Posted By
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.