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FIDC seeks extension of MSME restructuring scheme till March 2022
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SME Times News Bureau | 19 Apr, 2021
The Finance Industry Development Council (FIDC) has urged the Reserve
Bank of India (RBI) to extend the one-time restructuring scheme for
loans to MSMEs till March next year due to the severe second wave of
Covid-19.
The RBI had, on February 11, 2020, allowed one-time
restructuring of existing MSME advances, classified as "standard",
without downgrade in the asset classification subject to certain
additional provisioning and compliance with the conditions as prescribed
in the said notification. The time limit for implementation of the said
restructuring was till December 31, 2020.
In a letter to RBI
Governor Shaktikanta Das, FIDC Director General Mahesh Thakkar said that
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.
He noted that 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," the letter
said.
The NBFC body also requested that the benefit of PSL
(priority sector lending) classification for lending by banks to NBFCs
for on-lending be regularised as part of the overall PSL policy.
The
RBI on April 7, 2021, extended PSL classification for lending by banks
to NBFCs for on-lending by six months, till September 30, 2021, which is
a welcome step, it noted.
The FIDC further said that NBFCs are
important drivers of credit to MSME sector and therefore, improve the
outreach of formal banking to the MSMEs, thereby significantly
contributing to the goal of financial inclusion and aiding MSMEs to
recommence their economic activities.
The RBI has been continuing
to extend, on ad-hoc basis, the time-period for on-lending benefit by
six months at the time of each review.
"We request that benefit
of PSL classification for lending by Banks to NBFCs for on-lending may
please be regularised as part of the overall PSL policy. This will
enable the banks and NBFCs to cater to the needs to MSME sector in a
more organised manner," it said.
Further, under the on-lending
model, only fresh loans granted by NBFCs are allowed PSL benefit. The
existing unencumbered pools of eligible PSLs do not qualify for such
classification benefit.
"We hereby request the RBI to allow
refinance, apart from by way of buy-out but also qualifying for
hypothecation for DP for bank finance against existing unencumbered MSME
pool originated by NBFCs," the letter said.
A copy of the letter has also been sent to Union Micro, Small & Medium Enterprises Minister Nitin Gadkari.
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