The Reserve Bank of India (RBI) on January 1, 2019 released guidelines on restructuring of advances to the Micro, Small and Medium Enterprises (MSMEs).
The central bank allowed a one-time restructuring of existing debt of up to Rs 25 crore for the MSMEs which have defaulted on payment, however, the loans given to them continue to be classified as standard assets.
The move will help MSMEs facing cash crunch in the wake of demonetisation and GST implementation.
| Guidelines on restructuring of advances to MSMEs |
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| Eligibility |
| To be eligible for the scheme, the aggregate exposure to a borrower should not exceed Rs 25 crore as on January 1, 2019, including non-fund based facilities of banks and NBFCs. The borrowing entity, i.e. MSME, should be GST-registered on the date of implementation of the restructuring. However, this condition will not apply to MSMEs that are exempt from GST-registration. The restructuring has to be implemented by March 31, 2020. |
| The restructuring would be treated as implemented, if the following conditions are met: |
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Background
Earlier, the RBI's board in its meeting, held on November 19, 2018, had advised the central bank to examine a scheme for restructuring of stressed standard assets of MSME borrowers with aggregate credit facilities of up to Rs 25 crore.
The Micro, Small and Medium Enterprises form an important component of the Indian economy and contribute significantly to the country’s GDP, exports, industrial output, employment generation, etc.
Considering the importance of MSMEs, the RBI considered it necessary to take certain measures for creating an enabling environment for the sector.
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