Plea to extend restructuring period for MSME advances

Reported by: |Updated: May 4, 2021

The Finance Industry Development Council (FIDC), a representative organization of Assets and Loan Financing NBFCs, has requested the Reserve Bank of India to extend the validity of its notification of 6 August 2020, allowing one-time restructuring of existing MSME advances till 31 March 2021. This is necessary, says FIDC in a communication to RBI, since the current lockdown and its impact on the businesses, more so on the traders and retail customers, have affected their ability to repay the loans, which may cause deterioration in the asset quality of all the lenders, including NBFCs. Besides, says FIDC in its communication to the RBI, it will also impact the credit score of these under-served and credit starved customers rendering them ineligible for borrowing from other AIFIs. The time limit for implementation of the said restructuring was till 31 March 2021 and most of the entities that availed the moratorium have been servicing their obligations after the moratorium ended. FIDC has urged the RBI that borrower accounts, irrespective of whether or not such accounts had been restructured on any earlier occasion and which are ‘standard’ accounts as on 31 March 2021, may be allowed restructuring without any downgrade in asset classification, subject however to the lending NBFCs undertaking fresh credit assessment of the borrowing entity.

FIDC has also requested the RBI to consider advising banks and FIs to allow one

time restructuring of loans given by them to small NBFCs only (NBFCs with total asset size of less than Rs5 billion) and provide liquidity support to NBFCs for on-lending to MSMEs. The representation has also urged the RBI to increase the overall support outlay to AIFIs from Rs 500 billion to at least Rs 750 billion, the additional resource being made available exclusively to medium and small NBFCs, through SIDBI for period of 3 years.