New Delhi, Feb 28 (KNN) RBI has advised the banks to use their facility of providing ‘additional working capital limit’ to their micro and small enterprise (MSE) borrowers in order to overcome the difficulties arising out of cash flow mismatches post demonetization.

The Reserve Bank has said in its Agenda for 21st Meeting of Standing Advisory Committee (SAC) to be held in Chennai on March 3, 2017.

RBI said based on feedback that some MSEs are facing temporary difficulties in carrying out their normal business due to cash flow mismatches arisen from withdrawal of legal tender status of Specified Bank Notes (SBN) of Rs.500 and Rs.1000 denominations, banks have been advised in December 2016 that they may use the facility of providing ‘additional working capital limit’ (approved by their boards) to their MSE borrowers, to overcome the difficulties arising out of such cash flow mismatches also.

This would be a onetime measure up to March 31, 2017 and should thereafter be normalized in fresh working capital assessment cycle.

The apex bank also advised all entities regulated by it to provide an additional 60 days (subsequently, additional 30 days have been provided, in addition to the 60 days vide circular dated December 28, 2016) beyond what is applicable for the concerned regulated entity (RE) for recognition of a loan account as substandard certain cases.

It should be done when running working capital accounts (OD/CC)/crop loans, with any bank, the sanctioned limit whereof is Rs.1 crore or less; or term loans, whether business or personal, secured or otherwise, the original sanctioned amount whereof is Rs.1 crore or less, on the books of any bank or any NBFC, including NBFC (MFI).

This shall include housing loans and agricultural loans.

Additional period will also be provided if the limits at both the mentioned cases are mutually exclusive limits applicable to respective category of loans.

This dispensation applies to dues payable between November 1, 2016 and December 31, 2016.

RBI, however, clarified that this is a short-term deferment of classification as substandard due to delay in payment of dues arising during the period specified above and does not result in restructuring of the loans.

The additional time given shall only apply to defer the classification of an existing standard asset as substandard and not for delaying the migration of an account across sub-categories of NPA, RBI said. (KNN Bureau)