Banks want RBI to relax NPA norms for MSME sector underlockdown stress
Published On: Friday, May 7, 2021 | By: Team KnowMyStock
Commercial banks have requested the RBI to relax norms on the classification for non-performing loans for micro, medium, and small enterprises (MSMEs) in view of the stress the sector is facing due to lockdowns imposed by different state governments following the second Covid-19 wave. Sources said a request was made to the banking regulator to extend the non-performing asset classification norms for MSME borrowers to 180 days from 90 days now. A sub-standard loan is the first category of NPA. Bankers said the MSME sector was already reeling under pressure and now the second wave will make things extremely difficult for the sector.
Yesterday (7th May 2021), the central bank announced steps in the wake of the second wave of the Covid-19 pandemic to mitigate the economic impact due to local lockdowns. Among other steps, the regulator allowed debt restructuring for the MSME sector but limited it to entities that had not opted for the same scheme last year.
According to the rating agency, Crisil 3,400 mid-sized companies that are rated (out of 6,800) by the agency will be eligible for debt recast since their loan exposure is less than Rs 25 crore and are standard –the eligibility conditions as prescribed by RBI. Crisil said the restructuring could provide interim liquidity relief to these companies to cope with near-term cash-flow mismatches. Even if RBI has allowed the debt recast, the regulator still can relax NPA norms, bankers said.
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