The Reserve Bank of India (RBI) on Tuesday notified extension of the deadline for a one-time restructuring scheme of small business loans by another nine months to 31 December.
The central bank said that the aggregate exposure, including non-fund based facilities, of banks and NBFCs to the borrower should not exceed Rs25 crore as on 1 January, 2020. This recast, RBI said, will be applicable if the borrower’s account was in default but was a standard asset as on 1 January and continues to be classified as standard till the recast.
However, loans that have already been restructured in accordance with the last year's provisions will not be eligible for restructuring under the current circular.
“The micro, small and medium enterprises (MSMEs) sector plays an important role in the growth of the Indian economy, contributing over 28% of the gross domestic product (GDP), more than 40% of exports, while creating employment for about 110 million people," RBI had said last week while announcing the extension of the restructuring window.
“It is reemphasized that this is a one-time regulatory dispensation," RBI had said.
This comes after finance minister Nirmala Sitharaman announced in her Budget speech on 1 February that the government has asked RBI to consider extending the restructuring window till 31 March, 2021. “More than five lakh MSMEs have benefitted from restructuring of debt permitted by RBI in the last year," Sitharaman had said.
In January last year, RBI allowed lenders to recast loans of stressed micro, small and medium enterprises (MSMEs), provided the total fund- and non-fund-based exposure to such a borrower does not exceed ₹25 crore. Such a debt restructuring, the central bank had said, would not lead to a downgrade in asset classification. According to an RBI statement last year, a provision of 5% of the total outstanding loan, in addition to the money already set aside to cover potential losses, was to be made for such borrowers.