**Summary:**
This circular, issued by the Reserve Bank of India (RBI) on August 6, 2020 (RBI20202117 DOR.No.BP.BC421.04.048202021), addresses the restructuring of advances to Micro, Small, and Medium Enterprises (MSMEs). It is an extension of the scheme outlined in the circular DOR.No.BP.BC.3421.04.048201920 dated February 11, 2020, designed to support viable MSMEs impacted by the COVID-19 pandemic.
The circular permits banks and Non-Banking Financial Companies (NBFCs) to restructure existing loans to MSMEs, classified as 'standard' assets, without downgrading the asset classification, provided the following conditions are met:
1. The aggregate exposure of banks and NBFCs to the borrower does not exceed ₹25 crore as of March 1, 2020.
2. The borrower's account was a standard asset as of March 1, 2020.
3. The restructuring is implemented by March 31, 2021.
4. The borrowing entity is GST-registered on the date of implementation, unless exempt based on the exemption limit as of March 1, 2020.
5. Borrower accounts that may have slipped into NPA category between March 2, 2020 and the date of implementation may be upgraded as standard asset, as on the date of implementation of the restructuring plan.
6. Banks are required to maintain an additional provision of 5% for accounts restructured under these guidelines, above existing provisions.
All other instructions specified in the February 11, 2020 circular remain applicable.
For further information, Saurav Sinha, Chief General Manager-in-Charge, can be contacted.
Key Entities Referenced
Regional Rural Banks: Rural-focused banks in India.
Reserve Bank of India: The central bank of India, often referred to as RBI.
Commercial Banks: Banks that accept deposits and make loans to the public and businesses.
Small Finance Banks: Financial institutions in India focused on providing basic banking services to underserved populations.
Local Area Banks: Banks operating in a specific local area in India.
Primary Urban Cooperative Banks: Cooperative banks operating in urban areas.
State Cooperative Banks: Cooperative banks operating at the state level.
District Central Co operative Banks: Cooperative banks operating at the district level.
All India Financial Institutions: Financial institutions operating at the national level in India.
Non-Banking Financial Companies: Financial institutions that provide banking services without holding a banking license.
Micro, Small and Medium Enterprises: A sector of businesses in India classified by investment and turnover, often abbreviated as MSME.
Goods and Services Tax: An indirect tax used in India on the supply of goods and services, often abbreviated as GST.
Saurav Sinha: Chief General Manager-in-Charge at Reserve Bank of India.
COVID-19: The infectious disease caused by the SARS-CoV-2 virus
RBI/2020-21/17
DOR.No.BP.BC/4/21.04.048/2020-21 August 6, 2020
All Commercial Banks (including Small Finance Banks, Local Area Banks and Regional
Rural Banks)
All Primary (Urban) Co-operative Banks/State Co-operative Banks/ District Central Co-
operative Banks
All All-India Financial Institutions
All Non-Banking Financial Companies
Dear Sir/ Madam,
Micro, Small and Medium Enterprises (MSME) sector – Restructuring of Advances
Please refer to the circular DOR.No.BP.BC.34/21.04.048/2019-20 dated February 11,
2020 on the subject.
2. In view of the continued need to support the viable MSME entities on account of the
fallout of Covid19 and to align these guidelines with the Resolution Framework for
COVID 19 – related Stress announced for other advances, it has been decided to
extend the scheme permitted in terms of the aforesaid circular. Accordingly, existing
loans to MSMEs classified as 'standard' may be restructured without a downgrade in the
asset classification, subject to the following conditions:
i. The aggregate exposure, including non-fund based facilities, of banks and
NBFCs to the borrower does not exceed ₹25 crore as on March 1, 2020.
ii. The borrower’s account was a ‘standard asset’ as on March 1, 2020.
iii. The restructuring of the borrower account is implemented by March 31, 2021.
iv. 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
1from GST-registration. This shall be determined on the basis of exemption limit
obtaining as on March 1, 2020.
v. Asset classification of borrowers classified as standard may be retained as such,
whereas the accounts which may have slipped into NPA category between
March 2, 2020 and date of implementation may be upgraded as ‘standard asset’,
as on the date of implementation of the restructuring plan. The asset
classification benefit will be available only if the restructuring is done as per
provisions of this circular.
vi. As hitherto, for accounts restructured under these guidelines, banks shall
maintain additional provision of 5% over and above the provision already held by
them.
3. All other instructions specified in the circular dated February 11, 2020 shall remain
applicable.
Yours faithfully,
(Saurav Sinha)
Chief General Manager–in-Charge
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