Skip to main content

RBI revises rules for resolution of stressed MSME loans

By
The Reserve Bank of India on Thursday revised rules pertaining to revival of advances to small businesses and asked lenders to form districtlevel committees to resolve stressed loans to micro, small and medium enterprises ( MSMEs).
“In order to enable faster resolution of stress in an MSME account, every bank shall form Committees for Stressed MSME,” RBI said in a notification.
The rules have been revised for “ revival and rehabilitation of MSMEs having loan limits up to Rs.25 crore”.
“Restructuring of loan accounts with exposure of above Rs.25 crore will continue to be governed by the extant guidelines on corporate debt restructuring ( CDR) or Joint Lenders’ Forum ( JLF) mechanism,” the notification said.
The notification follows a May 2015 government decision to provide a simple and fast mechanism to address stress in accounts of MSMEs and also help in the promotion of such businesses, it said.
A board- approved policy to operationalise the revised framework will have to be put in place by banks before June 30, the regulator said.
These will be district- level committees which will resolve the stress in MSMEs under their jurisdictions, it said, adding in case of a MSME banking with multiple lenders, the lead banks panels should deal with the issue.
The committees shall comprise regional head of the bank as chairperson, and MSME loans in- charge as the convener and member. The bank should also appoint an external expert nominated by the bank and a representative of the state government, it said.
The bank boards should form a policy on the composition of the committee and terms of appointment, among other things.
Just like in the case of large borrowers, RBI has asked banks to look for stress from an early stage by identifying loans of over Rs.10 lakh as special mention accounts, right from 30 days non- payment of principal and interest onwards. The committee will have to come up with a corrective action plan for the account, which shall look at rectification, restructuring, recovery and also additional finance if needed, the apex bank said.
It can be noted that the current episode of rise in asset quality stress has been attributed to large corporates.
Business Standard, New Delhi, 18th March 2016

Comments

Post a Comment

Popular posts from this blog

Household debt up, but India still lags emerging-market economies: RBI

By
  Although household debt in India is rising, driven by increased borrowing from the financial sector, it remains lower than in other emerging-market economies (EMEs), the Reserve Bank of India (RBI) said in its Financial Stability Report. It added that non-housing retail loans, largely taken for consumption, accounted for 55 per cent of total household debt.As of December 2024, India’s household debt-to-gross domestic product ratio stood at 41.9 per cent. “...Non-housing retail loans, which are mostly used for consumption purposes, formed 54.9 per cent of total household debt as of March 2025 and 25.7 per cent of disposable income as of March 2024. Moreover, the share of these loans has been growing consistently over the years, and their growth has outpaced that of both housing loans and agriculture and business loans,” the RBI said in its report.Housing loans, by contrast, made up 29 per cent of household debt, and their growth has remained steady. However, disaggregated data sho...
Post a Comment
Read more

External spillovers likely to hit India's financial system: RBI report

By
  While India’s growth remains insulated from global headwinds mainly due to buoyant domestic demand, the domestic financial system could, however, be impacted by external spillovers, the Reserve Bank of India (RBI) said in its half yearly Financial Stability Report published on Monday.Furthermore, the rising global trade disputes and intensifying geopolitical hostilities could negatively impact the domestic growth outlook and reduce the demand for bank credit, which has decelerated sharply. “Moreover, it could also lead to increased risk aversion among investors and further corrections in domestic equity markets, which despite the recent correction, remain at the high end of their historical range,” the report said.It noted that there is some build-up of stress, primarily in financial markets, on account of global spillovers, which is reflected in the marginal rise in the financial system stress indicator, an indicator of the stress level in the financial system, compared to its p...
Post a Comment
Read more

Retail inflation cools to a six-year low of 2.82% in May on moderating food prices

By
  New Delhi: Retail inflation in India cooled to its lowest level in over six years in May, helped by a sharp moderation in food prices, according to provisional government data released Thursday.Consumer Price Index (CPI)-based inflation eased to 2.82% year-on-year, down from 3.16% in April and 4.8% in May last year, data from the Ministry of Statistics and Programme Implementation (MoSPI) showed. This marks the fourth consecutive month of sub-4% inflation, the longest such streak in at least five years.The data comes just days after the Reserve Bank of India’s (RBI) Monetary Policy Committee cut the repo rate by 50 basis points to 5.5%, its third straight cut and a cumulative reduction of 100 basis points since the easing cycle began in February. The move signals a possible pivot from inflation control to supporting growth.Food inflation came in at just 0.99% in May, down from 1.78% in April and a sharp decline from 8.69% a year ago.A Mint poll of 15 economists had projected CPI ...
Post a Comment
Read more