MSMEs get RBI relief, nod to one-time rejig of loans

In a new year gift to the MSME sector, the RBI today allowed a one-time restructuring of existing debt up to Rs 25 crore for the companies which have defaulted on payment but the loans given to them have continued to be classified as standard assets. The decision will help the micro, small and medium enterprises (MSMEs) which are facing cash crunch in the wake of demonetisation and GST implementation. The RBI's board in its crucial meeting held on November 19, 2018 had advised the central bank examine a scheme for restructuring of stressed standard assets of MSME borrowers with aggregate credit facilities of up to Rs 25 crore, subject to such conditions as are necessary for ensuring financial stability. To facilitate meaningful restructuring of MSME accounts that have become stressed, the RBI has decided to permit a one-time restructuring of existing loans to MSMEs that are in default but 'standard' as on January 1, 2019, without an asset classification downgrade, the central bank said in a statement. To be eligible for the scheme, the aggregate exposure, including non-fund based facilities of banks and NBFCs, to a borrower should not exceed Rs 25 crore as on January 1, 2019, and the restructuring has to be implemented by March 31, 2020 Restructuring package for MSME was one of the sorepoints of the tussle between the RBI and the government. There was a detailed presentation by Financial Services Secretary Rajiv Kumar on the cash crunch being faced by the MSME sector at the crucial November 19 board meeting. The government had suggested several steps to help the sector which contributes 50 per cent to the manufacturing sector "A major step for MSMEs with a total liability up to 25 cr suffering from past issues and illiquidity, though delayed. Congratulations RBI for the restructure circular," Swadeshi ideologue and RBI board member S Gurumurthy tweeted.