Debt restructuring relief for MSMEs

Mumbai: In view of the continued need to support the viable MSME entities on account of the fallout of Covid-19, the Reserve Bank on Thursday extended the one-time debt restructuring for small businesses by another three months to March 2021.

Besides, the central bank has also relaxed some of the existing provisions for availing this scheme by the micro, small and medium enterprises (MSMEs).

With Covid-19 continuing to disrupt normal functioning and cash flows, the stress in the MSME sector has got accentuated, warranting further support, RBI Governor Shaktikanta Das said while announcing the central bank's bi-monthly monetary policy outcome.

"Accordingly, it has been decided that stressed MSME borrowers will be made eligible for restructuring their debt under the existing framework, provided their accounts with the concerned lender were classified as standard as on March 1, 2020. This restructuring will have to be implemented by March 31, 2021," he said.

As per the existing scheme, the borrower account had to be standard as on January 1, 2020.

Asset classification of borrowers classified as standard may be retained as such, whereas the accounts which may have slipped into NPA category between March 2, 2020 and date of implementation may be upgraded as 'standard asset', as on the date of implementation of the restructuring plan.

However, the RBI asked banks to maintain additional provision of 5 per cent over and above the provision already held by them for accounts restructured under these guidelines.

The RBI has also retained the aggregate exposure limit of the existing guidelines. As a result, the exposure limit also including non-fund based facilities of banks and NBFCs to the borrower should not exceed Rs 25 crore as on March 1, 2020.