Restructuring of loans up to ₹25 crore: The government’s new year gift to MSMEs

The RBI says that this will alleviate the cash crunch woes of most MSMEs and boost manufacturing activities across the country.

After much elbowing by the government, the RBI has allowed lenders to do a one-time restructuring of loans of up to ₹25 crore. This new year bonanza announced by Reserve Bank of India (RBI) is likely to breathe fresh life to the stressed micro, small and medium enterprises (MSMEs).

The RBI has asked bank and non-banking financial companies (NBFCs) to formulate a loan re-cast policy that would encompass a framework for viability assessment of the stressed accounts and regular monitoring of the restructured accounts. This comes as good news for MSMEs, which had faced the double rage of demonetisation and the introduction of the goods and service tax (GST).

According to available government data, with an impressive size of ₹23 lakh crore, the Indian MSME sector accounts for a quarter of total commercial lending in India, but the average ticket size of less than ₹50 lakh has placed its growth is at the lower end of the growth spectrum (when compared with other sectors).

This move by the RBI is likely to radically alleviate the cash crunch woes of most MSMEs and boosting manufacturing activities across the country and create more job opportunities in the sector.

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