Banks urge RBI to relax bad loan norms for MSMEs

New Delhi, Mar 23 (KNN) The Reserve Bank of India (RBI) has been reached out by banks requesting relaxation in recognition of non-performing assets in the MSME sector.

Banks want that a restructured MSME account under the Covid package be considered NPA from the latest date and not from the date prior to restructuring, reported ET. 

It would lessen bank’s provisioning burden and give some relief to lenders. 

This comes after, in certain cases, banks were told to treat such accounts as bad loans starting from when they were restructured and accordingly make provisions.

A senior bank executive aware of the developments told ET that if the central bank allows such relaxation, the provisioning on such accounts will be from the fresh date when they turned non-performing and not backdated, which will lessen the burden on the lenders.

“Banks had approached the banking regulator early this month, he said.

As per the latest RBI data, outstanding advances to the MSME sector stood at ₹20.44 lakh crore in FY22. 

The gross (NPA) ratio pertaining to MSMEs in scheduled commerce banks (SCBs) was 7.6 per cent in FY 2021-22 and touched 6.1 per cent in FY 2022-23, through December 31.

"We have requested that only those accounts that performed satisfactorily in the specified period after restructuring during the Covid outbreak and later slipped into the NPA category be considered for such dispensation," said the above quoted executive.  (KNN Bureau)