Among slew of measures, RBI gives MSMEs additional 180 days to clear dues

The Reserve Bank on Wednesday announced a slew of measures for micro, small and medium enterprises (MSMEs), impacted by GST rollout and demonetisation, and gave them additional up to 180 days to clear their dues to banks.

The formalisation of business through registration under Goods and Services Tax (GST) adversely impacted cash flows of the smaller entities during the transition phase with consequent difficulties in meeting their repayment obligations to banks and non-banking financial companies (NBFCs), RBI Deputy Governor N S Vishwanathan said.

"As a measure to support their transition to a formalised business environment, it has been decided that for the GST- registered MSMEs which were standard as on August 31, 2017 and for which the aggregate exposure of banks and NBFCs does not exceed Rs 25 crore as on January 31, 2018, the amounts overdue as on September 1, 2017, and payments due between September 1, 2017 and January 31, 2018, be allowed by banks and NBFCs to be paid not later than 180 days without a downgrade in asset classification," he said.

MSME is the focus sector of the government as it is the largest employer. The sector also got benefit in the Budget 2018-19 announced by Finance Minister Arun Jaitley last week.

The corporate tax rate was reduced to 25 per cent from 30 per cent for the enterprises with a turnover of Rs 250 crore to give a fillip to the sector that contributes 40 per cent to the GDP.

The central bank also removed credit caps on MSME in services sector under priority sector.

"In the light of feedback received from various stakeholders and in line with the increasing importance of services sector in our economy, it has been decided to remove the currently applicable loan limits of Rs 5 crore and Rs 10 crore per borrower to MSME (Services) respectively, for classification under priority sector," it said.

Accordingly, it said, all bank loans to MSMEs, engaged in providing or rendering of services as defined in terms of investment in equipment under Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, shall qualify under priority sector without any credit caps.

In order to achieve level-playing field in the priority sector lending guidelines for banks, RBI said, "it was stipulated in April, 2015 that post 2018 (i.e., after three years from the issuance of guidelines), the sub-targets for lending to small and marginal farmers and micro enterprises shall be made applicable for foreign banks with 20 branches and above."

"It has been decided that the sub-target of 8 per cent of Adjusted Net Bank Credit (ANBC) or Credit Equivalent Amount of Off-Balance Sheet Exposure (CEOBE), whichever is higher, will be made applicable for lending to the small and marginal farmers for foreign banks with 20 branches and above from 2018-19," it said.

Further, the sub-target for bank lending to the Micro Enterprises in the country of 7.50 per cent of ANBC or CEOBE, whichever is higher, will also be made applicable for foreign banks with 20 branches and above from 2018-19.