The report by the expert committee of the Reserve Bank of India (RBI) suggests that the pandemic has adversely affected some of the best companies. These companies and businesses were doing great before the pandemic hit. The experts have also stated that the banks should be more cautious in restructuring the loans after suffering from huge losses for their previous efforts in the same area.

As per the RBI report, “We think banks will be a lot more prudent towards restructuring in this cycle vs past restructuring cycles where ultimate slippages/write-offs were as high as 70-75% in the corporate segment.”

These enormous write-offs in the previous reconstructing efforts made by the banks, make them more risk-averse, which is not a good sign for the industry.

Rs. 15.5 lakh crore of debt is to be paid by 19 sectors that were not under debt before the pandemic, among which the retail and wholesale trade sectors are the most affected ones. They account for almost 5.4 lakh crore of debt.

The sectors that were already under debt have an added amount of 22.2 lakh crore to be laid off now. The Non-Banking Financial Companies (NBFCs) are the worst affected sector of this group that has a debt of 7.98 lakh crore.

The agriculture sector is the only one that has a debt of 9.8 lakh crore before and even after the pandemic. This sector did not face any stressed debt added to the existing one in the Indian economy.

Among the companies under stressed debt conditions, half of them are not eligible for restructuring the loans. As per a Nomura analysis, 30-50% of 5,179 companies across 25 sectors, do not meet the reconstructing criteria for loans.

Based on 5 major parameters, the Kamath Committee has described sector-specific ratios. These 5 parameters are – Depreciation and Amortization (EBITDA), Tax, Total debt to earnings before interest, debt service coverage ratio, and total outstanding liability to adjusted net worth.

Among 30-50% of those companies, Port and Services, Aviation, and Construction sectors are the top 3 companies that do not qualify the restructuring pattern.