RBI Announces One-Time Restructuring Scheme For Some MSMEs

The Reserve Bank of India on Tuesday announced a one-time restructuring scheme for certain small borrowers, applicable on loans not exceeding Rs 25 crore and can be implemented by banks and non-bank lenders.

Under the new scheme, accounts in the micro, small and medium enterprises segment which are in default but are still standard as on Jan. 1, can be restructured once, without any downgrade on their asset classification, the central bank said in a statement.

“The restructuring has to be implemented by March 31, 2020,” the statement read. “A provision of 5 percent in addition to the provisions already held, shall be made in respect of accounts restructured under this scheme.”

The central bank said all banks and NBFCs would need to come up with a board approved policy for implementing the scheme. The lenders will also need to introduce a framework for viability assessment of stressed accounts and monitor the restructured MSMEs regularly.

In its financial stability report released on Monday, the regulator had noted that public-sector banks, especially those under the prompt corrective action framework of the RBI, had witnessed rapid growth in their MSME portfolio. However, it had warned that the growth could have come at the risk of lowering risk assessment standards.

This was evident from the fact that 2 percent of the loans extended in year ended March 2018 had turned bad for PCA banks, within the same year. The RBI noted that this ratio was very high and needed to be controlled.