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06/08/2020 03:49pm

RBI extends provisions of restructuring of MSME loans, keeps repo rate unchanged

image RBI extends provisions of restructuring of MSME loans, keeps repo rate unchanged

New Delhi, Aug 6 (KNN) The Reserve Bank of India (RBI) on Thursday gave a reason to cheer stressed Micro, Small and Medium Enterprises (MSMEs) by extending the provision of restructuring of loans.

A restructuring framework for MSMEs that were in default, but were standard on January 1, 2020 is already in place.

“The scheme has provided relief to a large number of MSMEs. With Covid-19 continuing to disrupt normal functioning and cash flows, the stress in the MSME sector has got accentuated, warranting further support,” said RBI Governor Shaktikanta Das.

Accordingly, it has been decided that stressed MSME borrowers will be made eligible for restructuring their debt under the existing framework, provided their accounts with the concerned lender were classified as standard as on March 1, 2020, Das said.

Restructuring of MSME debt will have to be implemented by March 31, 2021, RBI Governor Shaktikanta Das said.

Meanwhile, the apex bank kept repo rate untouched at 4 per cent; and reverse repo rate at 3.35 per cent.

“In the MPC’s assessment, global economic activity has remained fragile and in retrenchment in the first half of 2020. A renewed surge in COVID-19 infections in major economies in July has subdued some early signs of revival that had appeared in May and June," the RBI Governor added.

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  1. Yerram
    Yerram 07/08/2020 10:14 AM

    The policy does not mention anywhere Atma Nirbhar Bharat Abhiyan Scheme of GoI for revival of stressed enterprises and provision of Subordinated Debt. Banks will prefer to take the RBI guidelines now given for revival instead of GoI scheme that is yet to make a beginning. This would make the SoD scheme potentially irrelevant. RBI needs to clarify that the SoD scheme and Revival and Restructuring of MSMEs would continue and the Banks may speed up such revival. One silver lining is that ARC-sell will attract higher provisions and therefore, Banks would do well to recover all the viable MSMEs sooner than later and the provisions can be better engaged. Further, had the Banks revived the viable NPAs one year back, they would have all become standard assets now, hopefully.

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