Restructuring of Advances 

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

RBI/2020-21/17

DOR.No.BP.BC/4/21.04.048/2020-21

August 6, 2020

All Commercial Banks (including Small Finance Banks, Local Area Banks and Regional Rural Banks)

All Primary (Urban) Co-operative Banks/State Co-operative Banks/ District Central Co-operative Banks

All All-India Financial Institutions

All Non-Banking Financial Companies

Dear Sir/ Madam,

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

Please refer to the circular DOR.No.BP.BC.34/21.04.048/2019-20 dated February 11, 2020 on the subject.

2. In view of the continued need to support the viable MSME entities on account of the fallout of Covid19 and to align these guidelines with the Resolution Framework for COVID 19 – related Stress announced for other advances, it has been decided to extend the scheme permitted in terms of the aforesaid circular. Accordingly, existing loans to MSMEs classified as 'standard' may be restructured without a downgrade in the asset classification, subject to the following conditions:

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

2. The borrower’s account was a ‘standard asset’ as on March 1, 2020.
   
   

3. The restructuring of the borrower account is implemented by March 31, 2021.
   
   

4. 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 March 1, 2020.
   
   

5. Asset classification of borrowers classified as standard may be retained as such, whereas the accounts which may have slipped into NPA category between March 2, 2020 and date of implementation may be upgraded as ‘standard asset’, as on the date of implementation of the restructuring plan. The asset classification benefit will be available only if the restructuring is done as per provisions of this circular.
   
   

6. As hitherto, for accounts restructured under these guidelines, banks shall maintain additional provision of 5% over and above the provision already held by them.
   
   

3. All other instructions specified in the circular dated February 11, 2020 shall remain applicable.

Yours faithfully,

(Saurav Sinha)

Chief General Manager–in-Charge

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

RBI/2019-20/160

DOR.No.BP.BC.34/21.04.048/2019-20

February 11, 2020

All banks and NBFCs regulated by the Reserve Bank of India

Dear Sir/ Madam,

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

Please refer to the circular DBR.No.BP.BC.18/21.04.048/2018-19 dated January 1, 2019. It has been decided to extend the one-time restructuring of MSME advances permitted in terms of the aforesaid circular. Accordingly, 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:

1. 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.
   
   

2. 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.
   
   

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

4. 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.
   
   

2. 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.

3. All other instructions specified in the circular dated January 1, 2019 shall be applicable.

Yours faithfully,

(Saurav Sinha)

Chief General Manager-in-Charge

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

RBI/2018-19/100

DBR.No.BP.BC.18/21.04.048/2018-19

January 1, 2019

All banks and NBFCs regulated by the Reserve Bank of India

Dear Sir/ Madam,

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

1. Please refer to the circulars DBR.No.BP.BC.100/21.04.048/2017-18 dated February 07, 2018 and DBR.No.BP.BC.108/21.04.048/2017-18 dated June 6, 2018. In this regard, with a view to facilitate meaningful restructuring of MSME accounts {MSME as defined in the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006} that have become stressed, it has been decided to permit a one-time restructuring of existing loans to MSMEs classified as ‘standard’ without a downgrade in the asset classification, subject to the following conditions:

i. The aggregate exposure, including non-fund based facilities, of banks and NBFCs to the borrower does not exceed ₹250 million as on January 1, 2019.

ii. The borrower’s account is in default but is a ‘standard asset’ as on January 1, 2019 and continues to be classified as a ‘standard asset’ till the date of implementation of the restructuring.

iii. 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.

iv. The restructuring of the borrower account is implemented on or before March 31, 2020. A restructuring would be treated as implemented if the following conditions are met:

1. all related documentation, including execution of necessary agreements between lenders and borrower / creation of security charge / perfection of securities are completed by all lenders; and
   
   

2. the new capital structure and / or changes in the terms and conditions of the existing loans get duly reflected in the books of all the lenders and the borrower.
   
   

v. A provision of 5% in addition to the provisions already held, shall be made in respect of accounts restructured under these instructions. Banks will, however, have the option of reversing such provisions at the end of the specified period, subject to the account demonstrating satisfactory performance during the specified period as defined at paragraph 5 below.

vi. Post-restructuring, NPA classification of these accounts shall be as per the extant IRAC norms.

vii. Banks and NBFCs shall make appropriate disclosures in their financial statements, under ‘Notes on Accounts’, relating to the MSME accounts restructured under these instructions as per the following format:

No. of accounts restructured

Amount (₹ in million)

viii. All other instructions applicable to restructuring of loans to MSME borrowers shall continue to be applicable.

2. Banks and NBFCs desirous of adopting this scheme shall put in place a Board approved policy on restructuring of MSME advances under these instructions within a month from the date of this circular. The policy shall, inter alia, include framework for viability assessment of the stressed accounts and regular monitoring of the restructured accounts.

3. It is clarified that accounts classified as NPA can be restructured; however, the extant asset classification norms governing restructuring of NPAs will continue to apply.

4. As a general rule, barring the above one-time exception, any MSME account which is restructured must be downgraded to NPA upon restructuring and will slip into progressively lower asset classification and higher provisioning requirements as per extant IRAC norms. Such an account may be considered for upgradation to ‘standard’ only if it demonstrates satisfactory performance during the specified period.

5. ‘Specified Period’ means a period of one year from the commencement of the first payment of interest or principal, whichever is later, on the credit facility with longest period of moratorium under the terms of restructuring package. ‘Satisfactory Performance’ means no payment (interest and/or principal) shall remain overdue for a period of more than 30 days. In case of cash credit / overdraft account, satisfactory performance means that the outstanding in the account shall not be more than the sanctioned limit or drawing power, whichever is lower, for a period of more than 30 days.

Yours faithfully,

(Saurav Sinha)

Chief General Manager-in-Charge

Encouraging formalisation of MSME sector

RBI/2017-18/186

DBR.No.BP.BC.108/21.04.048/2017-18

June 6, 2018

All banks and NBFCs regulated by the Reserve Bank of India

Madam / Dear Sir,

Encouraging formalisation of MSME sector

Please refer to the circular DBR.No.BP.BC.100/21.04.048/2017-18 dated February 07, 2018.

2. Having regard to the input credit linkages and ancillary affiliations, it has now been decided to temporarily allow banks and NBFCs to classify their exposure, as per the 180 days past due criterion, to all MSMEs, including those not registered under GST, as a ‘standard’ asset, subject to the following conditions:

1. The aggregate exposure, including non-fund based facilities, of banks and NBFCs to the borrower does not exceed ₹ 250 million as on May 31, 2018.
   
   

2. The borrower’s account was standard as on August 31, 2017.
   
   

3. The payments due from the borrower as on September 1, 2017 and falling due thereafter up to December 31, 2018 were/are paid not later than 180 days from their original due date.
   
   

4. In respect of dues payable by GST-registered MSMEs from January 1, 2019 onwards, the 180 days past due criterion shall be aligned to the extant IRAC norms in a phased manner, as given in the Annex. However, for MSMEs that are not registered under GST as on December 31, 2018, the asset classification in respect of dues payable from January 1, 2019 onwards shall immediately revert to the extant IRAC norms.
   
   

5. The other terms and conditions of the circular dated February 07, 2018 remain unchanged.
   
   

Yours faithfully,

(Saurav Sinha)

Chief General Manager-in-Charge

Annex

Period during which any payment falls due

Time permitted

September 1, 2017 – December 31, 2018

180 days

January 1, 2019 – February 28, 2019

150 days

March 1, 2019 to April 30, 2019

120 days

May 1, 2019 onwards

90 days

Relief for MSME Borrowers registered under Goods and Services Tax (GST)

RBI/2017-18/129

DBR.No.BP.BC.100/21.04.048/2017-18

February 07, 2018

All banks and NBFCs regulated by the Reserve Bank of India

Madam / Dear Sir,

Relief for MSME Borrowers registered under Goods and Services Tax (GST)

Presently, banks and NBFCs in India generally classify a loan account as Non-Performing Asset (NPA) based on 90 day and 120 day delinquency norms, respectively. It has been represented to us that formalisation of business through registration under GST had adversely impacted the cash flows of the smaller entities during the transition phase with consequent difficulties in meeting their repayment obligations to banks and NBFCs. As a measure of support to these entities in their transition to a formalised business environment, it has been decided that the exposure of banks and NBFCs to a borrower classified as micro, small and medium enterprise under the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, shall continue to be classified as a standard asset in the books of banks and NBFCs subject to the following conditions:

1. The borrower is registered under the GST regime as on January 31, 2018.
   
   

2. The aggregate exposure, including non-fund based facilities, of banks and NBFCs, to the borrower does not exceed ₹ 250 million as on January 31, 2018.
   
   

3. The borrower’s account was standard as on August 31, 2017.
   
   

4. The amount from the borrower overdue as on September 1, 2017 and payments from the borrower due between September 1, 2017 and January 31, 2018 are paid not later than 180 days from their respective original due dates.
   
   

5. A provision of 5% shall be made by the banks/NBFCs against the exposures not classified as NPA in terms of this circular. The provision in respect of the account may be reversed as and when no amount is overdue beyond the 90/1201 day norm, as the case may be.
   
   

6. The additional time is being provided for the purpose of asset classification only and not for income recognition, i.e., if the interest from the borrower is overdue for more than 90/1202 days, the same shall not be recognised on accrual basis.
   
   

Yours faithfully,

(S. K. Kar)

Chief General Manager

1 Consequent upon transition to 90 day delinquency norm with effect from March 31, 2018 for NBFCs, provision reversal will be with reference to the 90 day norm

2 Consequent upon transition to 90 day norm with effect from March 31, 2018 for NBFCs, restriction on income recognition on accrual basis will be with reference to interest overdue for more than 90 days.