RBI allows one time restructuring of Standard MSME loans up to ₹25 crore

  • By Admin
  • 2 Jan
RBI allows one time restructuring of Standard MSME loans up to ₹25 crore
2 Jan

The Reserve Bank of India (RBI) on Tuesday announces New Year Bonanza for the Micro Small and Medium Enterprises (MSMEs). The RBI allowed one-time restructuring of existing debt (Fund and Non Fund based) up to Rs 25 crores for the companies which have defaulted on payment but the loans have continued to be classified as standard assets by the lenders.

The Modi Government has been advocating to provide relief to the stressed MSME sector since long.

The decision will act as boon for the Micro, Small and Medium Enterprises (MSMEs) which are facing cash crunch due to implementation of demonetization and GST. Non payment by Large Corporate to the MSMEs and non receipt of their legitimate dues, due to implementation of Insolvency and Bankruptcy Code is also one of the reason due to which the MSMEs are facing cash crunch.

According to the RBI statement, MSME loan restructuring, has to be implemented by 31 March 2020 and an additional provision of 5% of the total outstanding loan, will have to be provided by the lenders.

“Each bank or non-banking financial company (NBFC) should formulate a policy for this scheme with board approval which shall, inter alia, include framework for viability assessment of the stressed accounts and regular monitoring of the restructured accounts,” RBI said.

In earlier 2016, the Central Bank has introduced a mechanism for rehabilitation of the stressed loans upto Rs. 25 crores.

As per the RBI guidelines, the stress accounts which are Standard, should classify into three categories which are Special Mention Account (SMA) 0, SMA 1 and SMA-2.

Borrower accounts, while delay in repayment of loans by upto 30 days, those delay by 31-60 days and delay by 61-90 days classified as SMA 0 , SMA 1 and SMA-2, respectively.

However, the borrower accounts remain standard till 90 days.