RBI extends one-time restructuring scheme for MSME advances

Restructuring under the scheme has to be implemented latest by 31 December 2020

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 as on 1 January 2020. The restructuring under the scheme has to be implemented latest by 31 December 2020. This will benefit the eligible MSME entities which could not be restructured under the provisions of the circular dated 1 January 2019 as also the MSME entities which have become stressed thereafter.

It is re-emphasised that this is a one-time regulatory dispensation. Detailed guidelines, in this regard, will be issued shortly.

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 1 January 2019, was permitted without an asset classification downgrade.

The restructuring of the borrower account was to be implemented by 31 March 2020. The scheme has provided relief to a large number of MSMEs.

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.

With a view to further strengthening monetary transmission, RBI has also decided to link pricing of loans by scheduled commercial banks for the medium enterprises also to an external benchmark effective 1 April 2020. Detailed guidelines to this effect will be issued separately.

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