- Such loans will benefit those who were standard loan accounts on 1 March 2020
- In the old scheme, such loans used to get benefits which were standard loans till 1 January 2020.
The Reserve Bank of India (RBI) on Thursday extended the current plan’s deadline for restructuring the default MSME loan up to Rs 25 crore by 3 months to 31 March 2021 in a two-quarter monetary policy review. Under this scheme, loans that have been declared default on Micro, Small and Medium Enterprises (MSME), which were standard loan accounts on 1 March 2020, will be restructured. Under the scheme already underway, only those loans which were in the standard category till January 1, 2020 could be restructured.
RBI Governor Shaktikanta Das said that the outbreak of Kovid-19 is causing disruptions to normal functioning and cash flow. In such a situation, the pressure in the MSME sector has increased and it needs support. Shaktikanta Das said that in view of this situation, it has been decided that the MSME borrowers, who are under pressure in working, should be given the eligibility for restructuring the loan within the existing system.
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Additional 5% provision will be made on the loan to be restructured
The RBI, however, has asked banks to make 5 per cent additional provisions over the pre-made provisions for accounts to be restructured under these guidelines. The Reserve Bank has retained the loan limit given in this case under the existing guidelines. Therefore, the total loan amount, including non-fund based facilities of banks and NBFCs, should not exceed Rs 25 crore on March 1, 2020.
Benefit of the scheme to GST registered MSMEs
Under the other terms of the scheme, default loans of the same MSMEs can be restructured, which will be registered in GST on the day the loan is restructured. However, this condition will not be applicable to MSMEs who are exempted from GST registration. The MSME sector plays an important role in the country’s economy. It contributes 28 per cent to the country’s GDP and over 40 per cent to exports. MSME employs around 11 crore people.
