One-time Restructuring of MSME

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Micro, Small and Medium Enterprises (MSMEs) form an important component of the Indian economy and contribute significantly to the country’s GDP, exports, industrial output, employment generation, etc. Considering the importance of MSMEs in the Indian economy, it is considered necessary at this juncture to take certain measures for creating an enabling environment for the sector.
With a view to facilitate meaningful restructuring of MSME accounts that have become stressed, RBI has been decided to permit a one-time restructuring of MSME existing loans classified as ‘standard.

One-time Restructuring of MSME

Conditions for one-time restructuring of MSME

RBI has 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:

  • The aggregate exposure, including non-fund based facilities, of banks and NBFCs to the borrower does not exceed Rs 250 million as on January 1, 2019.
  • 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.
  • 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.
  • 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:
    • 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
    • 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.
  • A provision of 5% in addition to the provisions already held, shall be made in respect of accounts restructured under these instructions.

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