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Credit sachets can aid capital stressed PSBs: RBI deputy governor

Public sector banks should learn from FMCG players and “democratise credit”, a move that can help them solve the “biggest fiscal challenge” of recapitalisation, former RBI deputy governor Viral Acharya said on Wednesday.

“There are some PSBs whose business model is so broken in my assessment that there won’t be any immediate suitors who are interested in buying their equity in a significant manner or at decent prices. What is the option? I’d say they should focus on sachetisation or democratisation of credit,” Mr. Acharya said, speaking at a summit organized by ETBFSI.com.

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RBI sets sectoral norms for resolution of COVID-19 related stressed assets

The Reserve Bank on Monday specified five financial ratios and sector-specific thresholds for resolution of COVID-19 related stressed assets in 26 sectors, including auto components, aviation, and tourism.

The circular issued by the RBI for resolution of stressed assets is based on the recommendations of the K.V. Kamath committee, which submitted its report on September 4. “The recommendations of the Committee have been broadly accepted by the Reserve Bank,” RBI said in a release.

The key financial ratios suggested by the committee are total outside liabilities/adjusted tangible networth; total debt/EBITDA; current ratio, which is current assets divided by current liabilities; debt service coverage ratio; and average debt service coverage ratio.

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