Relief for MSME borrowers registered under GST
The Reserve Bank of India has given some respite to the MSME borrowers registered under GST. The MSME has represented to RBI that formalisation of business through registration under GST had adversely impacted the cash flows of the smaller entities during the transition phase with consequent difficulties in meeting their repayment obligations to Banks and NBFCs.
Banks and NBFC classify a loan account as Non-Performing Asset (NPA) based on 90 day and 120 day delinquency norms, respectively which was causing hardship to small entities. As a measure of support to these small entities, the RBI has decided that the exposure of banks and NBFCs to a borrower classified as micro, small and medium enterprise under the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, shall continue to be classified as a standard asset in the books of banks and NBFCs subject to the following conditions:
- The borrower is registered under the GST regime as on January 31, 2018.
- The aggregate exposure, including non-fund based facilities, of banks and NBFCs, to the borrower does not exceed 25 crore as on January 31, 2018.
- The borrower’s account was standard as on August 31, 2017.
- The amount from the borrower overdue as on September 1, 2017 and payments from the borrower due between September 1, 2017 and January 31, 2018 are paid not later than 180 days from their respective original due dates
- A provision of 5% shall be made by the banks/NBFCs against the exposures not classified as NPA in terms
- The additional time is being provided for the purpose of asset classification only and not for income recognition