What changed
The target date for achieving specified thresholds for four operational ratios—Total Debt/EBITDA, Current Ratio, DSCR, and ADSCR—has been pushed back from an earlier date to October 1, 2022. This extension is due to the resurgence of COVID-19 in 2021 and the difficulties borrowers face in meeting these parameters. The deadline for the TOL/ATNW ratio remains unchanged at March 31, 2022.
What it means for you
Banks and lenders now have additional time—until October 2022—for borrowers under COVID resolution plans to meet key operational financial health metrics. This provides relief to stressed borrowers still recovering from the pandemic's second wave. However, the debt-equity mix ratio (TOL/ATNW) must still be achieved by March 2022, so lenders need to monitor that separately.
What you must do
- Update your internal tracking systems to reflect the new October 1, 2022 deadline for the four operational ratios (Total Debt/EBITDA, Current Ratio, DSCR, ADSCR).
- Ensure that the TOL/ATNW ratio deadline of March 31, 2022 remains in your compliance calendar and is not overlooked.
- Communicate the revised timelines to your resolution plan teams and relevant borrowers to align expectations.
- Review existing resolution plans to confirm which borrowers are affected and adjust monitoring schedules accordingly.
Who it affects
All Commercial Banks including Small Finance Banks, Local Area Banks, and Regional Rural Banks, All Primary (Urban) Co-operative Banks, State Co-operative Banks, and District Central Co-operative Banks, All All-India Financial Institutions, All Non-Banking Financial Companies including Housing Finance Companies, Borrowers with COVID-19 resolution plans under the August 6, 2020 framework
Which specific ratios have had their deadline extended?
The four operational ratios—Total Debt/EBITDA, Current Ratio, Debt Service Coverage Ratio (DSCR), and Average Debt Service Coverage Ratio (ADSCR)—now have a target date of October 1, 2022.
Is the TOL/ATNW ratio deadline also extended?
No, the target date for achieving the Total Outside Liabilities/Adjusted Tangible Net Worth (TOL/ATNW) ratio remains unchanged at March 31, 2022.
Why did RBI extend the deadline?
Due to the resurgence of the COVID-19 pandemic in 2021, which posed difficulties for borrowers in meeting the operational parameters as originally scheduled.