For enhancing credit to MSME entrepreneurs, the RBI Governor mentioned that in Feb 2021, the scheduled commercial banks were allowed to deduct credit disbursed for new MSME borrowers from their NDTL for calculation of CRR.
In an effort to reduce the stress on small businesses and the MSME sector amid the unprecedented Covid surge gripping the nation, RBI Governor Shaktikanta Das on Wednesday announced a set of measures targeted at offering relief for such cash starved enterprises.
For enhancing credit to MSME entrepreneurs, Das mentioned that in Feb 2021, the scheduled commercial banks were allowed to deduct credit disbursed for new MSME borrowers from their Net Demand and Time Liabilities (NDTL) for calculation of CRR. “In order to further incentivise inclusion of unbanked MSMEs into the banking system, this exemption which is currently available for exposures of up to Rs 25 lakh and for credit disbursed up to fortnight ending Oct 1 2021 is being extended till Dec 31, 2021,” he stated in his address.
His next set of measures related to resolution of Covid related stressed assets of individuals, small businesses and MSMEs. Stating how this section has been the most vulnerable category of borrowers in this environment, Das added that the resurgence of Covid in recent weeks and the associated containment measures impacted the nascent economic revival that was taking shape. “Borrowers – individuals and SMBs and MSMEs having aggregate exposure of up to Rs 25 crore and which have not availed restructuring under any of the earlier restructuring frameworks including resolution framework 1.0 shall be eligible for resolution 2.0,” he stated.
The restructuring under the proposed framework may be invoked up to September 30 and shall have to be implemented within 90 days after invocation.
Das further stated that in respect of individual borrowers and SMBs who have availed restructuring of their loans under resolution framework 1.0 where resolution plan permitted moratorium of less than 2 years, lending institutions have been permitted to use this window to modify such plans to the extent of increasing the period of moratorium and/or extending residual tenure up to total of 2 years.
He further added that lending institutions are being permitted as a one time measure to review the working capital sanction limits of SMEs and MSMEs restructured earlier.
The MSME sector has been under considerable stress in the aftermath of Covid’s second wave which has severely hit their cash flows, survival and thrown them off gear.