MUMBAI: In a significant relief measure to small businesses, particularly, non-GST registered firms, the RBI tweaked norms exempting banks not to classify loans as NPAs even if payments are delayed by 180 days.
Typically, banks and NBFCs have to classify an account as NPA if loan repayments are delayed for 90 days after due date. It may be noted that a similar exemption doubling the loan repayment delays up to 180 days was first extended to GST-registered MSMEs in February. However, this is only a short-term breather — considering the hardships MSMEs are facing owing to demonetisation and GST — and not a long-term policy. The benefits will eventually be phased out. As per the RBI guidelines, from 2019, the duration for which repayment can be delayed will be cut down to 90 days pas the due date.
“Small businesses, which were standard accounts as on August 31, 2017 and where outstanding credit till January, 2017 did not exceed `25 crore, will be eligible for the relief. Accordingly, eligible MSME accounts, which were standard as on August 31, 2107, shall continue to be classified as standard by banks and NBFCs if the payments due as on September 1, 2017 and falling due thereafter up to December 31, 2018 were/are paid not later than 180 days from their original due date,” it said.
The RBI also urged businesses to get GST-registered and those MSMEs that fail to do so before December 31, 2018 can no longer avail the relief for repaying dues from 2019. Such accounts shall immediately revert to the 90 day norm. The move was to facilitate easier transition of MSMEs to the formalised sector. According to TransUnion Cibil’s MSME Pulse report, the NPA rate for entities that took up to `10 crore of loans was at 11.3 per cent as on December, 2017.