RBI proposes loan restructuring of MSMEs

The Reserve Bank of India (RBI) has opened a loan-restructuring window for micro, small and medium enterprises (MSMEs). The loan restructuring would be a big relief for troubled small businesses hit by demonetization in late 2016 and the implementation of goods and services tax (GST) in July 2017. Under the scheme, a provision of 5% in addition to the provisions already held will be made in respect of accounts restructured. RBI asked banks and non-banking finance companies to come up with board-approved policies. This will include the framework for viability assessment of the stressed accounts and monitoring of the restructured accounts regularly.

Key Highlights 

  • The scheme is applicable to the stressed accounts provided the total fund and non-fund based exposure to such a borrower does not surpass Rs 25 crore.
  • The scheme will be applicable to the existing loans of the MSMEs that are in default but classified as ‘standard’ as on January 1, 2019, without an asset classification downgrade. The restructuring has to be implemented by March 31, 2020.
  • A provision of 5 percent of the total outstanding loan, in addition to the money already set aside to cover potential losses, will have to be made for such borrowers.
  • Each bank or non-banking financial company (NBFC) should formulate a policy which includes a framework for viability assessment of the stressed accounts and regular monitoring of the restructured accounts.
  • The loan restructuring scheme would be applicable for the borrowers who are GST-registered on the date of implementation of restructuring. The restructuring would aid provide a stimulus to the economy since the MSME sector contributes significantly to job creation and employs around 12 crore people, the second largest after the