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Feb 12, 2020
FISME lauds extension of restructuring, CRR ease for MSMEs

Following through the Budget announcement, the Reserve Bank of India (RBI) has extended the One-time Restructuring Scheme for Micro, Small and Medium Enterprises (MSMEs) December 31, 2020.

The Monetary Policy unveiled by RBI, has also allowed the Banks flexibility in maintaining Cash Reserve Ratio (CRR) against loans to MSMEs, Housing and Automobile.

The RBI has stated that scheduled commercial banks will be allowed to deduct the equivalent of incremental credit disbursed by them as retail loans for automobiles, residential housing and loans to micro, small and medium enterprises (MSMEs), over and above the outstanding level of credit to these segments as at the end of the fortnight ended January 31, 2020 from their net demand and time liabilities (NDTL) for maintenance of cash reserve ratio (CRR). This exemption will be available for incremental credit extended up to the fortnight ending July 31, 2020

"It is clear that RBI is pushing for increasing lending to focused sectors which have greater multiplier effect  for generating economic growth by right incentives", says Anil Bhardwaj, Secretary General of Federation of Indian Micro and Small & Medium Enterprises (FISME).

While welcoming the steps taken by RBI in the Monetary Policy, FISME again reiterated the need to have a comprehensive restructuring scheme as the number of MSMEs facing stress was huge.

RBI's one-time restructuring of loans is limited to 'GST registered MSMEs' that were in default but 'standard' as on January 1, 2019, was permitted without an asset classification downgrade.

'In absence of Insolvency and Bankruptcy Rules for proprietorship and partnership firms- that comprise of 97% of MSME sector, an orderly restructuring or liquidation exercise is extremely difficult because of competing claims of multiple creditors who want to take possession of MSME assets', Bhardwaj said.

FISME had raised the issue before the Prime Minister also and was hopeful that Insolvency and Bankruptcy Board of India (IBBI) would act to frame Rules for firms.  

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