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RBI announces relief measures for MSMEs

May 07, 2021
RBI announces relief measures for MSMEs

Mumbai, Maharashtra

Shaktikanta Das, Governor, Reserve Bank of India (RBI) has announced a slew of relief measures to reduce the pressure on Small and Midsize Business (SMBs) and Micro, Small & Medium Enterprises (MSMEs). The relief comes in at a time when the nation is reeling under the second wave of the COVID-19 pandemic.

The MSME sector is severely affected as their cash flows dwindle. Categorising them as the most vulnerable category of borrowers in the current times, Das stated that the reappearance of COVID-19 through the second wave, along with its related lockdowns and restriction, was affecting the emerging economic revival in the country.

The RBI Governor said that to improve credit to MSME entrepreneurs, scheduled commercial banks can deduct credit expended for new MSME borrowers from their Net Demand and Time Liabilities (NDTL) for the calculation of Cash Reserve Ratio (CRR). He added that this exemption is currently available for exposures of up to Rs 2.5 million that is disbursed up to the fortnight ending October 1, 2021. It is now being extended till December 31, 2021, to include unbanked MSMEs into the banking system.

Das mentioned that the assets of borrowers, with aggregate exposure of up to Rs 250 million, who have not availed restructuring under the previous frameworks including resolution framework 1.0 are now eligible for resolution 2.0. Under the proposed framework, the restructuring may be invoked up to September 30, 2021, and implemented within 90 days after invocation.

The RBI Governor added that lending institutions have been allowed to modify plans of those who availed restructuring of their loans under resolution framework 1.0 with a moratorium of fewer than two years. The moratorium period or residual tenure can now be extended up to two years. As a one-time measure, the institutions can review the working capital sanction limits of SMEs and MSMEs restructured earlier.

Source: ET Auto