Note on Restructuring of Advances in MSME Sector By CS Lalit Rajput

Micro, Small and Medium Enterprises (MSME) sector – Restructuring of Advances

Reserve Bank of India vide circular no. RBI/2019-20/160, DOR.No.BP.BC.34/21.04.048/2019-20 dated 11.02.2020 has decided to extend the one-time restructuring of MSME advances permitted.
According to above mentioned circular, a one-time restructuring of existing loans to MSMEs classified as 'standard' without a downgrade in the asset classification is permitted, subject to the following conditions:

I.    The aggregate exposure, including non-fund based facilities, of banks and NBFCs to the borrower does not exceed ?25 crore as on January 1, 2020.

II.    The borrower’s account was in default but was a ‘standard asset’ as on January 1, 2020 and continues to be classified as a ‘standard asset’ till the date of implementation of the restructuring.

III.    The restructuring of the borrower account is implemented on or before December 31, 2020.

IV.    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 January 1, 2020.

It is clarified that accounts which have already been restructured in terms of the circular dated January 1, 2019 shall be ineligible for restructuring under this circular.

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