**Policy Summary: RBI Circular DBR.No.BP.BC.10821.04.048/2017-18**
**Date:** June 6, 2018
**Subject:** Encouraging Formalisation of MSME Sector
**Issuing Authority:** Reserve Bank of India (RBI)
**Addressees:** All banks and NBFCs regulated by the RBI
**Purpose:** To temporarily ease asset classification norms for Micro, Small, and Medium Enterprises (MSMEs) to encourage formalization. This circular refers to and supplements the circular DBR.No.BP.BC.10021.04.048/2017-18 dated February 07, 2018.
**Key Provisions:**
* Banks and NBFCs may classify exposures to all MSMEs (including those not registered under GST) as standard assets based on a 180-day past due criterion, subject to the following conditions:
* The aggregate exposure of banks and NBFCs to the borrower does not exceed ₹250 million as of May 31, 2018.
* The borrower's account was classified as a standard asset as of August 31, 2017.
* Payments due from the borrower between September 1, 2017, and December 31, 2018, are paid within 180 days of their original due date.
* For GST-registered MSMEs, the 180-day past due criterion will be phased out beginning January 1, 2019, aligning with extant Income Recognition and Asset Classification (IRAC) norms, as follows:
* Payments falling due between January 1, 2019, and February 28, 2019: 150 days permitted.
* Payments falling due between March 1, 2019, and April 30, 2019: 120 days permitted.
* Payments falling due from May 1, 2019, onwards: 90 days permitted.
* For MSMEs not registered under GST as of December 31, 2018, the extant IRAC norms will immediately apply to dues payable from January 1, 2019, onwards.
* All other terms and conditions outlined in the circular dated February 07, 2018, remain unchanged.
**Contact:**
Saurav Sinha
Chief General Manager-in-Charge
Key Entities Referenced
Reserve Bank of India: The regulatory body issuing the circular.
NBFCs: Non-Banking Financial Companies regulated by the Reserve Bank of India.
MSME sector: Micro, Small and Medium Enterprises sector which the circular aims to support.
GST: Goods and Services Tax, a tax regime relevant to MSME registration and compliance.
DBR.No.BP.BC.10021.04.048201718: Reference to the circular dated February 07, 2018, related to MSMEs.
IRAC norms: Income Recognition and Asset Classification norms, the standard guidelines for asset classification.
Saurav Sinha: Chief General Manager-in-Charge at Reserve Bank of India
August 31, 2017: Date on which the borrower's account must have been standard to qualify for the relaxed classification.
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:
i. 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.
ii. The borrower’s account was standard as on August 31, 2017.
iii. 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.
iv. 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.
v. The other terms and conditions of the circular dated February 07, 2018 remain
unchanged.
Yours faithfully,
(Saurav Sinha)
Chief General Manager-in-ChargeAnnex
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