Finance Industry Development Council seeks MSME restructuring scheme extension till March 2022

NEW DELHI: In the wake of rising Covid-19 infections and the subsequent curfews imposed across various states, the Finance Industry Development Council (FIDC), a representative body of non-banking financial companies (NBFCs) has urged the Reserve Bank of India (RBI) to consider extending the one-time restructuring of MSME advances till March 2020.

In a recent letter addressed to RBI Governor Shaktikanta Das, FIDC said that owing to the second wave of Covid-19, the micro, small and medium enterprises (MSMEs) have not been able to revive their economic activities and are in urgent need of support from the lenders. “Various surveys and reports are forewarning that the operating environment for banks will most likely remain challenging, as the second wave could dent the sluggish recovery in consumer and corporate confidence...Considering the challenging environment for MSMEs and lenders, it will be helpful, if the RBI extends the restructuring scheme till at least March 31, 2022,” FIDC Director General Mahesh Thakkar wrote.

The council added that restructuring should also be allowed for MSMEs, including the retail and wholesale trade segment accounts, which were restructured during the first wave, but are standard even after moving out from moratorium. This should further be without any downgrade in asset classification, and should be subject to the lending NBFCs undertaking necessary credit assessment of the future cash flows of the said entity. It further requested the central bank to provide priority status lending (PSL) classification benefit for banks lending to NBFCs on a permanent basis.

Earlier this month, the RBI extended the PSL benefit by six months till September 30, 2021. However, the letter said under the on-lending model, only fresh loans granted by NBFCs are allowed PSL benefit and the existing unencumbered pools of eligible PSLs do not qualify for such benefit.