The Reserve Bank of India’s (RBI) restructuring package for MSMEs will help recast Rs 1 trillion of loans for 7,00,000 eligible small businesses, said Rajiv Kumar, Secretary, Department of Financial Services (DFS), reported PTI.
Kumar’s estimate is much higher than domestic rating agency Icra's assessment of Rs 10,000 crore. Speaking at a post-Budget meeting with industry leaders he said, “They all can be restructured till March 2020 without downgrading the assets. Rs 1 trillion worth loans will get restructured.”
He added, “The scheme will help free up additional resources, which will fuel demand and create further opportunities in the industry.” The scheme has earlier been termed ‘regressive’ by analysts as the RBI had officially discontinued the practice of restructuring of advances. This was among the factors blamed for high NPAs.
Karthik Srinivasan, Group Head, Icra had said, "During the past few years, RBI has been doing away with various schemes for asset quality forbearance. Hence, this is regressive from a credit culture point of view, given the past experiences of the banking sector with restructuring.”
A private sector banker told PTI, “Even though the asset continues to be standard, the borrower's credit history is impacted, which may cause some difficulty at a later stage. Especially in the period post demonetisation or calamities like the floods in Kerala, MSMEs entitled for the help have shown a general reluctance to come forward.”
The issue of restructuring of MSME accounts was initially discussed in the RBI board meeting on November 19, 2018. At the meeting, the central board, which met amid the tussle between the Finance Ministry and the central bank over various issues, had discussed the restructuring scheme for stressed MSMEs.