Loan repayment: RBI gives breather to MSME sector
Mumbai: The Reserve Bank of India (RBI) on Wednesday gave additional time for loan repayment to micro, small and medium enterprises (MSMEs) affected by the goods and services tax (GST), without getting their accounts classified as non-performing.
This facility is available only to those firms whose aggregate loans are less than Rs25 crore.
“Amounts overdue as on September 1, 2017 and payments due between September 1, 2017 and January 31, 2018 (will) be allowed by banks and NBFCs to be paid not later than 180 days from their original due date, without a downgrade in asset classification,” the RBI said in a statement.
The dispensation is subject to some conditions, including that exposure must be standard as on 31 August 2017.
Currently, banks and non-banking financial companies in India generally classify a loan account as a non-performing asset (NPA) if it is not paid within 90 days and 120 days respectively, from the due date.
The central bank said that the formalization of business under GST had adversely affected cash flows of the smaller entities during the transition phase. These firms were finding it difficult to meet their repayment obligations to lenders.
According to bankers, while the RBI has relaxed the norms, they will continue with their recovery efforts to ensure that at least those MSMEs that have the ability to repay do so, as well as to provide them with fresh credit, if required.
Additionally, RBI has also removed loan limits of Rs5 crore and Rs10 crore per borrower to MSMEs in the services sector for classification under priority sector norms. Currently, banks have to earmark 40% of their loans to certain sectors, including MSMEs, important to the economy. According to experts, this will encourage banks to extend more loans to MSMEs.
“This will also incentivize NBFCs like us to extend fresh credit to MSMEs because there will be more opportunities to sell down as banks often buy these loan portfolios to meet priority sector lending targets,” said Anil Kothuri, president and head, Edelweiss Retail Finance.
Latest RBI data showed that bank loans to micro and small enterprises (under priority sector) stood at Rs9.07 trillion as on 22 December 2017, registering year-on-year growth of 10.6%.
In the Union budget, the government extended sops to MSMEs. It proposed to cut the corporate tax rate to 25% for companies with annual revenue of up to Rs250 crore.
The budget earmarked Rs3 trillion for 2018-19 under the Pradhan Mantri Mudra Yojana or Mudra scheme. In addition, Rs3,794 crore was allocated for credit support, capital and interest subsidy to MSME.
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