Govt approaches RBI to relax NPA norms for MSMEs

The government has approached the Reserve Bank to relax norms for non-performing assets (NPAs) or bad loans in case of small and mid-sized businesses to help them tide over the cash crunch problem.

The MSME ministry has sought an extension of the NPA classification period from the current 90-day window up to 180 days.

"As far as the NPA norms of RBI are concerned, during that window, where that relaxation was given, efforts are being made to get it further extended," Additional Secretary in the ministry of micro, small and medium enterprises (MSME), Ram Mohan Mishra told reporters here.

Mishra said MSME Secretary A K Panda had attended a meeting with Reserve Bank of India nearly a month ago on the issue and the Department of Financial Services is also working on the issue.

An accounts turns NPA if it is not serviced for 90 days. In case of small businesses and SMEs, payments come usually late. Once they miss the 90-day period and fall in the NPA category, their credit line is cut.

In the absence of vibrant factoring or trade receivable market, small business and SME face the issue of timely credit availability.

As per some estimates, banks are sitting on unrecognised stressed loans worth Rs 7.7 lakh crore in corporate and SME sectors and expect around 35 per cent of them to slip into the NPA category in the next few months.

Mishra said the ministry is trying to drive home the point that there should be a little more understanding of the constraints of a business, especially micro and small units, and is also trying to rope in the state governments and sensitise them to get a more information on the status of an enterprise.