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Companies that have relatively weaker credit profiles and are part of low-resilience sectors are expected to benefit more from Reserve Bank of India’s (RBI) new debt recast scheme, rating agency Crisil said on Thursday.

Half of Crisil-rated mid-sized companies will be eligible for the restructuring window offered under Resolution Framework 2.0 announced by RBI, it said. Mid-sized companies refer to those with aggregate bank loan exposures of less than 500 crore.

RBI on 5 May announced a slew of measures, including restructuring window for small businesses, to mitigate impact of the pandemic on businesses and individuals against the backdrop of the second wave of covid-19. Borrowers, including individuals, small businesses, and micro, small and medium enterprises having aggregate exposure of up to 25 crore would be eligible for consideration if they have not availed of restructuring under any of the earlier recast frameworks, as per the announcement.

“Though localized at the moment, disruptions caused by the second wave have the potential to hit smaller businesses, which were yet to fully recover from the blow dealt by the first wave. The restructuring would entail rescheduling of their financial obligations, thereby easing liquidity pressure," the rating agency said.

Crisil said it rates about 6,800 mid-sized companies, excluding financial sector entities. Of these around 3,500 are SMEs. About 3,400 of them are standard accounts, which makes them eligible for availing of the restructuring.

RBI’s intervention is timely and companies with weaker credit profiles will benefit more from the restructuring scheme, said Subodh Rai, chief ratings officer, Crisil Ratings Ltd.

“Four out of five companies eligible have sub-investment category ratings, indicating their weak ability to manage liquidity shocks. Restructuring 2.0 may provide interim liquidity relief to these companies to cope with near-term cash-flow mismatches," Rai said.

Last fiscal, a third of these SMEs had cushioned their liquidity by availing of RBI moratorium on loans. This relief was complemented by a rebound in demand, that limited the number of firms that had opted for restructuring.

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