MSME – restructuring of advances

RBI circular dated 6th August, 2020 on the subject, wherein they have allowed restructuring of loans & advances subject to certain conditions, which are

  1. The aggregate exposure, including non-fund based facilities, of banks and NBFCs to the borrower does not exceed ₹25 crore as on March 1, 2020.
  2. The borrower’s account was a ‘standard asset’ as on March 1, 2020.
  3. The restructuring of the borrower account is implemented by March 31, 2021.
  4. The borrowing entity is GST-registered on the date of implementation of the restructuring. However, this condition will not apply to MSMEs that are exempt from GST-registration. This shall be determined on the basis of exemption limit obtaining as on March 1, 2020.
  5. Asset classification of borrowers classified as standard may be retained as such, whereas the accounts which may have slipped into NPA category between March 2, 2020 and date of implementation may be upgraded as ‘standard asset’, as on the date of implementation of the restructuring plan. The asset classification benefit will be available only if the restructuring is done as per provisions of this circular.
  6. As hitherto, for accounts restructured under these guidelines, banks shall maintain additional provision of 5% over and above the provision already held by them.

Copy of RBI circular can be found here https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11942&Mode=0

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