NEW DELHI: The Reserve Bank of India has given a lifeline to the Micro, Small and Medium Enterprises (MSMEs), one of the worst-hit by the lockdown, by allowing banks for one-time restructuring of corporate loan without classifying them as non-performing assets.
While announcing the monetary policy review, RBI governor Shaktikanta Das on Thursday acknowledged the stress suffered by the sector and decided to allow banks to one time restructure loans.
"A restructuring framework for MSMEs that were in default but ‘standard’ as on January 1, 2020, is already in place. The scheme has provided relief to a large number of MSMEs. With COVID-19 continuing to disrupt normal functioning and cash flows, the stress in the MSME sector has got accentuated, warranting further support," Das said.
However, some conditions were put on the loans so that it is not misused. The conditions are aggregate exposure, including non-fund based facilities, of banks and NBFCs to the borrower is not exceeding Rs 25 crore as on March 1, 2020. Also, the restructuring will be allowed only to those borrowers, whose account had been standard asset’ as on March 1, 2020.
Besides, bankers will have to keep 10 per cent additional provision for such loans. Also, the restructuring had to be done by March 2021.
Again, the MSME needs to have GST registration to avail the facility. However, exemptions are granted in some cases.
"The restructuring of MSME accounts will provide the necessary relief to the MSME sector which has experienced one of the most severe impacts resulting from the conditions of lockdown, containment, reverse migration, supply chain, and trade choking, etc, due to COVID,” Uday Kotak, president CII and Chairman Kotak Mahindra Bank said.
Last month, a joint survey was carried out by Federation of Indian Micro and Small & Medium Enterprises (FISME), SKOCH Group, Bhartiya Vitta Salahkar Samiti (BVSS) and Tax Law Educare Society (TALES), which revealed that the sector is starting at a large number of NPAs, endangering many jobs.
It had recommended that there is a need to restructure all term loans under moratorium.
Also, MSME ministry officials in a joint presentation to the parliamentary committee had voiced that over 10 crore jobs are in danger, mainly on account of the lockdown.