Relief for MSME Borrowers registered under GST

Presently, a loan account is classified as Non-Performing Asset (NPA) based on the 90 day and 120 day delinquency norms, respectively.

It was 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.

It has now been decided that the exposure to a MSME borrower shall continue to be classified as a standard asset subject to the following conditions:

i.            The borrower is registered under the GST regime as on January 31, 2018.

ii.            The aggregate exposure, does not exceed ₹ 250 million as on January 31, 2018.

iii.            The borrower’s account was standard as on August 31, 2017.

iv.            The amount overdue as on September 1, 2017 and payments due between September 1, 2017 and January 31, 2018 are paid not later than 180 days from their respective original due dates.

v.            A provision of 5% shall be made against the exposures not classified as NPA in terms of this circular. The provision may be reversed as and when no amount is overdue beyond the 90/120 day norm, as the case may be.

vi.            The additional time is being provided for the purpose of asset classification only and not for income recognition. If the interest from the borrower is overdue beyond 90/120 days, the same shall not be recognised on accrual basis.

Based on RBI circular dated 7^th Feb 2018. For any further clarification please refer www.rbi.org.in