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Business News/ Industry / Banking/  RBI eases bad loan classification norms for MSMEs
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RBI eases bad loan classification norms for MSMEs

Bank loans to all MSMEs having credit facility of up to Rs25 crore will now be classified as non-performing assets (NPAs) as per the 180-days due criterion

RBI has now extended this relaxation to all MSMEs irrespective of whether they are registered under GST. Photo: MintPremium
RBI has now extended this relaxation to all MSMEs irrespective of whether they are registered under GST. Photo: Mint

New Delhi: In a move aimed at formalizing the economy further and creating more jobs, the Reserve Bank of India (RBI) has eased bad loan classification norms for micro, small and medium enterprises (MSMEs).

Bank loans to all MSMEs having credit facility of up to Rs25 crore will now be classified as non-performing assets (NPAs) as per the 180-days due criterion.

In February, banks and non-banking financial companies (NBFCs) were allowed to temporarily classify their exposure to MSMEs registered under the goods and services tax (GST) as per the 180-days due criterion rather than the 90-days due criterion. It was done to ease the transition of MSMEs to the formalized sector under GST.

RBI has now extended this relaxation to all MSMEs irrespective of whether they are registered under GST.

“Accordingly, eligible MSME accounts, which were standard as on August 31, 2017, 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," RBI said in a statement as part of its development and regulatory policies released with the monetary policy.

The government, which has been pushing for easing of credit flow to MSME enterprises, welcomed the relaxation.

“In continuation of support & relief to #MSMEs, NPA recognition for GST and non GST #MSMEs now at 180 days for dues up to 31st Dec 18," tweeted Rajiv Kumar, secretary in the finance ministry’s department of financial services.

However, to encourage MSMEs to get registered under GST, RBI said that while these relaxations will be withdrawn in a phased manner for GST-registered MSMEs from 1 January 2019, it will be done immediately for dues payable for MSMEs not registered under GST.

“In view of the benefits from increasing formalization of the economy for financial stability, the 180-day past due criterion, in respect of dues payable by GST-registered MSMEs from January 1, 2019 onwards, shall be aligned to the extant norm of 90 day past due in a phased manner," RBI said, adding that for entities that do not get registered under GST by 31 December 2018, the asset classification in respect of dues payable from 1 January 2019 will immediately revert to the 90-day norm.

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Published: 07 Jun 2018, 11:24 AM IST
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