RBI releases guidelines on restructuring MSMEs loans

To facilitate restructuring of micro, small and medium enterprises (MSMEs) 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 restructuring has to be implemented by March 31, 2020.

“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 250 million as on January 1, 2019,” RBI said in a statement.

“A provision of 5 per cent in addition to the provisions already held, shall be made in respect of accounts restructured under this scheme. Each bank/NBFC should formulate a policy for this scheme with Board approval which shall, inter alia, include framework for viability assessment of the stressed accounts and regular monitoring of the restructured accounts,” the statement added.

“The RBI decision will be a big relief to financially stressed knitwear exporting units in Tiruppur,” said Tiruppur Exporters’ Association (TEA) president Raja M Shanmugham.

He said the MSME knitwear exporting units were affected due to demonetisation and the subsequent implementation of the GST, in addition to the prevailing adverse factors both domestically and externally.

TEA has been representing to the ministries and RBI to treat MSMEs separately and exclude them from following Basel III norms, which is meant for corporate units, Shanmugham said.

Noting the positive garment exports trend observed in October and November months, Shanmugham said the latest decision to permit one-time restructuring would be helpful to the concerned MSMEs in exports business to get revived and continue in the business. 

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