The Reserve Bank of India has released a restructuring scheme for the stressed accounts of micro, small and medium-sized enterprises (MSME). The scheme will avoid the restructured loans from being termed as “non-performing”. This is applicable only applied to accounts with an outstanding value of ₹25 crores or less.
To avail this scheme, the loan has to be categorized as “standard”, irrespective of the loan defaulting or not. But if the loan has been downgraded, then it won't be applicable for the scheme.
Under the one time scheme, the banks and nonbanking entities were given time until the end of the 2019-2010 financial year to restructure the eligible accounts. In addition to existing provisions, they will also have to acquire a 5% provision charge on every restructured loan. The borrowers have to be GST-compliant to avail this scheme.
This scheme is to boost small businesses in the country. It has been the key demand for the central government.
In addition to providing some relief to India’s small businesses from loans they’ve defaulted on, this program will allow them further access to financing.
Small businesses form the backbone of the Indian economy with regards to employment and manufacturing. Small businesses are also an important vote bank.
With regards to GST registration, the central government is also planning to raise the minimum sales requirement for small businesses.
The sales threshold, which is currently ₹20 lacs could be reportedly raised to as much ₹75 lacs, which will spare smaller businesses from having to comply with the extensive needs of the GST taxation policy.