RBI announces incentives to help MSMEs hit by 2nd Covid-19 wave

Reserve Bank Governor Shaktikanta Das on Wednesday announced a slew of measures to offset economic impact of second Covid-19 wave on MSMEs and small businesses. To incentivise credit flow to micro, small, and medium enterprise (MSME) borrowers, scheduled commercial banks in February 2021 were allowed to deduct credit disbursed to new MSME borrowers from their net demand and time liabilities (NDTL) for calculation of the cash reserve ratio (CRR).

"To further incentivise the inclusion of unbanked MSMEs into the banking system, this exemption currently available for exposures up to Rs 25 lakh and for credit disbursed up to the fortnight ending October 1, 2021, is being extended till December 31, 2021," RBI governor said.

The resurgence of the COVID-19 pandemic in India in recent weeks and the associated containment measures adopted at local levels have created new uncertainties and impacted the nascent economic revival that was taking shape, Das said.

As the Covid-19 wave wreaks havoc in India, the most vulnerable categories of borrowers are individual borrowers, small businesses and MSMEs.

Announcing measures targeting these groups of borrowers, Das said individuals and small businesses and MSMEs having aggregate exposure of up to Rs 25 crore, and who have not availed restructuring under any of the earlier restructuring frameworks (including under the Resolution Framework 1.0 dated August 6, 2020), and who were classified as 'Standard' as on March 31, 2021, will be eligible to be considered under Resolution Framework 2.0.

The restructuring under this framework may be invoked up to September 30, 2021, and will have to be implemented 90 days after invocation.

The borrowers, who have availed restructuring under Resolution Framework 1.0, where the resolution plan permitted a moratorium of fewer than two years, lending institutions are being allowed to use this window to modify such plans to the extent of increasing the period of moratorium and extending the residual tenor up to a total of two years.

Also, in respect to small businesses and MSMEs restructured earlier, banks and NBFCs are also being permitted, as a one-time measure, to review the working capital sanctioned limits, based on a reassessment of the working capital cycle, margins, etc, the RBI Governor said.

Also read: NBFCs seek MSME restructuring scheme extension till March 2022

Also read: G-SAP 1.0: RBI to make 2nd G-secs purchase worth Rs 35,000 cr on May 20

Also read: Big boost for vaccine producers, pharma players! RBI unleashes Rs 50,000 cr liquidity for emergency healthcare