Extend MSME restructuring scheme till March 2022: NBFCs request to RBI

NBFCs

Non-banking finance companies (NBFCs) have written to the Reserve Bank of India requesting them to extend the one-time restructuring scheme of MSME advances till March 31, 2022, as they are not able to revive their businesses amid covid.

In February 2021, the Reserve Bank of India (RBI) had allowed one-time restructuring of existing MSME advances, who are ‘standard’ without downgrading the asset classification, keeping the additional provisioning and other compliances in consideration.

As notified by the RBI then, the deadline for implementation of the scheme was till December 31, 2020.

In a recent written request, Finance Industry Development Council, a Representative Body of Assets and Loan Financing NBFCs, said that because of the severe second wave of COVID-19, the micro, small and medium enterprises (MSMEs) could not revive their economic activities and are in urgent need of support from the lenders.

“Considering the challenging environment for MSMEs and lenders, it will be helpful, if the RBI extends the restructuring scheme till at least March 31, 2022,” the Finance Industry Development Council (FIDC) wrote.

NBFCs primarily cater to the funding needs of micro, small and medium enterprises (MSME), including retail and wholesale traders.

The industry body requested the RBI to permit restructuring of few MSMEs loans that already have already received similar relief under the same scheme at the time of the first wave of COVID-19, but are now facing challenges.

The FIDC has also requested the banking regulator to offer priority status lending (PSL) classification benefit for bank lending to the NBFCs on a permanent basis. Earlier this month, the central bank extended the PSL benefit by six months till September 30, 2021.

“Owing to the severe second wave of COVID-19, the MSMEs as also the retail and wholesale trader industry have not been able to revive their economic activities and therefore are in urgent need of support from the lenders. Various surveys and reports are forewarning that the operating environment for banks will most likely remain challenging, as the second wave could dent the sluggish recovery in consumer and corporate confidence, and further, suppress banks’ prospects for new business. Considering the challenging environment for MSMEs and lenders, it will be helpful, if the RBI extends the said notification till at least March 31, 2022,” reads the letter written by FIDC to Nitin Jairam Gadkari, Minister of Micro, Small & Medium Enterprises.

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