mumbai companies in sectors such as retail and wholesale trade textiles and engineering which were repaying loans before the covid crisis can look forward to easier terms of repayment while nbfcs power steel and real estate businesses that were struggling even before the crisis may have to face the pain of recovery actionthe rbi said on monday it has broadly accepted the recommendation of the fivemember expert committee headed by k v kamath the panel has identified 26 sectorsimpacted by the crisis and has prescribed six key ratios within which the resolution plan has to be finalised for sectors not mentioned the ratios can be decided by the individual bank these ratios essentially determine how much debt a company can build up in relation to its capital and incometime is of essence at the present juncture considering the large volume and the fact that only standard assets are eligible under the proposed scheme a segmented approach of bucketing these accounts under mild moderate and severe stress may ensure a quick turnaround to complete this task simplified restructuring for mild and moderate stress may be prescribed severe stress cases would require comprehensive restructuring the panel said in its reportfor instance all sectors must have a debt service coverage ratio equal to or more than 1 what this means is that the company has to generate operating income to cover its annual debt and interest payments after restructuring also all banks are required to have a current ratio of at least 1 this means that the companys debt due in a year or less are at par with their assets the only exception is aviation where a ratio of 04 has been allowed because airlines follow the cash and carry model for revenue purpose thereby creating almost nil debtors and higher current liabilities in form of advance received from customers also airlines enjoy six to nine months of credit from vendorslast week finance minister nirmala sitharaman had asked banks and nbfcs to implement the onetime restructuring plan by september 15 the government and the rbi are keen to ensure that the stressed sectors hit hard by the covid19 pandemic get relief and are able to restart their activities vigorouslythe 26 sectors specified by the rbi include automobiles power tourism cement chemicals gems and jewellery logistic mining manufacturing real estate and shipping among others the advantage of this checklist is that banks restructure loans of all companies that fulfill the conditions without fear of subsequent action by enforcement authorities if loans go bad the flip side is that these fixed parameters could reduce the headroom for banks to restructure loans for some sectors using their judgmentaccording to analysts some of the prescribed ratios are half of what the lenders seek for sanctioning loans to companies at normal times this means that banks can reduce loan instalments for stressed borrowers by extending loans by two years provided the companies generate enough cash to meet the reduced liabilitieswhat makes the resolution framework for covidrelated stress