<\/p>\n
It needs to be noted that, RBI has already put in place a restructuring framework where MSMEs that were in default but \u2018standard\u2019 as on January 1, 2020, subject to the restructuring being implemented up to December 31, 2020. Such has provided relief to a large number of MSMEs.<\/p>\n
However, RBI said, “Recognising the need for continued support to MSMEs\u2019 meaningful restructuring, it has been decided that, in respect of MSME borrowers facing stress on account of the economic fallout of the pandemic, lending institutions may restructure the debt under the existing framework, provided the borrower\u2019s account was classified as standard with the lender as on March 1, 2020. This restructuring shall be implemented by March 31, 2021.”<\/p>\n
Existing loans to MSMEs classified as ‘standard’ may be restructured without a downgrade in the asset classification, subject to the following conditions as per RBI:<\/p>\n
Aggregate exposure, including non-fund based facilities, of banks and NBFCs to the borrower does not exceed Rs25cr as on March 1, 2020.<\/p>\n
The borrower\u2019s account was a \u2018standard asset\u2019 as on March 1, 2020.<\/p>\n
The restructuring of the borrower account is implemented by March 31, 2021.<\/p>\n
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.<\/p>\n
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 \u2018standard asset\u2019, 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.<\/p>\n
For accounts restructured under these guidelines, banks shall maintain the additional provision of 5% over and above the provision already held by them.<\/p>\n<\/div>\n