RBI extends one-time restructuring scheme for MSME advances

The Reserve Bank of India (RBI) has decided to extend the benefit of one-time restructuring without an asset classification downgrade to standard accounts of GST registered MSMEs that were in default on January 1, 2020.

The restructuring under the scheme has to be implemented latest by December 31, 2020, RBI said in a statement on Thursday.

The proposed move will benefit the eligible MSME entities which could not be restructured under the provisions of the circular dated January 1, 2019, as also the MSME entities which have become stressed thereafter.

The RBI re-emphasised that this is a one-time regulatory dispensation. Detailed guidelines in this regard would be issued shortly, the RBI said.

The Micro, Small and Medium Enterprises (MSMEs) sector plays an important role in the growth of the Indian economy, contributing over 28% of the GDP, more than 40% of exports while creating employment for about 11 crore people. Considering the importance of MSMEs in the Indian economy and for creating an enabling environment for the sector in its efforts towards formalisation, a one-time restructuring of loans to MSMEs that were in default but ‘standard’ as on January 1, 2019, was permitted without an asset classification downgrade.

The restructuring of the borrower account was to be implemented by March 31, 2020. The scheme has provided relief to a large number of MSMEs. The process of formalisation of the MSME sector has a positive impact on financial stability and this process is still underway, the apex bank said.

The RBI has also decided to permit extension of date of commencement of commercial operations (DCCO) of project loans for commercial real estate, delayed for reasons beyond the control of promoters, by another one year without downgrading the asset classification, in line with the treatment accorded to other project loans for the non-infrastructure sector. This would complement the initiatives taken by the Government of India in the real estate sector. The detailed instructions will be issued shortly, the RBI said.