After presenting Union Budget 2020 on 1st February, Finance Minister Nirmala Sitharaman said the government has asked the Reserve Bank of India (RBI) to extend the debt restructuring window by next year ending March 31, 2021.
In Monetary Policy Review Meeting today, RBI said that will extend the scheme to 31st December 2020.
RBI said that the Micro, Small and Medium Enterprises (MSMEs) sector is an important aspect in the growth of the Indian economy. It contributes over 28 per cent of the GDP, more than 40 per cent of exports, also it is creating employment for about 11 crore people in India.
“Considering the importance of MSMEs in the Indian economy and for creating an enabling environment for the sector in its efforts towards formalisation, a one-time restructuring of loans to MSMEs that were in default but ‘standard’ as on January 1, 2019, was permitted without an asset classification downgrade. The restructuring of the borrower account was to be implemented by March 31, 2020,” said RBi in a statement.
It will be a great relief large number of MSMEs, “As the process of formalisation of the MSME sector has a positive impact on financial stability and this process is still underway, it has been decided to extend the benefit of one-time restructuring without an asset classification downgrade to standard accounts of GST registered MSMEs that were in default as on January 1, 2020. The restructuring under the scheme has to be implemented latest by December 31, 2020,” the central bank said.
“This scheme will benefit the eligible MSME entities which could not be restructured under the provisions of the circular dated January 1, 2019 as also the MSME entities which have become stressed thereafter. It is reemphasised that this is a one-time regulatory dispensation. Detailed guidelines, in this regard, will be issued shortly,” RBI said.