RBI announces a slew of measures for MSMEs

New Delhi, May 5 (KNN) The Governor of the Reserve Bank of India (RBI) Shaktikanta Das issued a statement on the state of economy and announced a series of measures for different segments of borrowers including Micro and Small and Medium enterprises (MSMEs). 

Responding to the need for orderly resolution of stressed assets, RBI has proposed a ‘Resolution Framework 2.0 for COVID Related Stressed Assets of Individuals, Small Businesses and MSMEs’.

According to it, these borrowers having aggregate exposure of upto Rs. 25 crore and who have not availed restructuring under any of the earlier restructuring frameworks (including under the Resolution Framework 1.0 dated August 6, 2020), and who were classified as ‘Standard’ as on March 31, 2021 shall be eligible to be considered under Resolution Framework 2.0.

For those who have availed restructuring of their loans under Resolution Framework 1.0, where the resolution plan permitted moratorium of less than two years, lending institutions are being permitted to increase the period of moratorium and/or extending the residual tenor up to a total of 2 years.

RBI has further clarified that ‘in respect of small businesses and MSMEs restructured earlier, lending institutions are also being permitted as a one-time measure, to review the working capital sanctioned limits, based on a reassessment of the working capital cycle, margins, etc.’.

RBI Governor has announced creation of a Special Long-Term Repo Operations (SLTRO) for Small Finance Banks (SFBs) of Rs. 10,000 crore for fresh lending of up to Rs. 10 lakh per borrower.

Further, lending by SFBs to MFIs for on-lending to small borrowers will now be classified as Priority Sector Lending which includes MSMEs.

RBI’s instructions that credit to new MSME Entrepreneurs were allowed to be deducted for calculation of the cash reserve ratio (CRR) is to also act as incentive to Banks.