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RBI scheme for sick MSMEs

The Reserve Bank of India introduced a one-time restructuring scheme for MSMEs with a maximum exposure of Rs 25 crore. The restructuring has to be implemented by 31 March 2020. This will mean banks will have to incur an additional provision of 5% for these restructured accounts. The MSME account should remain a ‘standard asset’ as of 1January 2019 to be eligible for the scheme and the accounts in default can be restructured, provided their asset classification has not been downgraded. The RBI said in a statement any MSME account which is restructured must be downgraded to non-performing asset upon restructuring and will slip into progressively lower asset classification and higher provisioning requirements.

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