RBI to Consider Viability of MSME Loan Restructuring, Says Shaktikanta Das

In conclusion to the 2-hour discussion with the representatives of MSME associations, RBI to look into the feasibility of loan restructuring scheme

learn more about Aastha Singal

By Aastha Singal


You're reading Entrepreneur India, an international franchise of Entrepreneur Media.

The Reserve Bank of India has introduced a one-time loan restructuring scheme for the micro, small and medium enterprises (MSMEs) with loans up to INR 25 crore, with effect from January 1, 2019. To address the further concerns of the individuals from the sector, the RBI governor Shaktikanta Das held a 2-hour meeting with the representatives of MSME organizations to discuss the pain points.

Addressing the media post the meeting, Das emphasized that the banks and MSMEs need to work together to effectively implement the restructuring scheme. Earlier during the announcement, the RBI has directed the banks/NBFCs to formulate a policy for viability assessment of the stressed accounts, the concerns regarding which seemingly remained the major focus of the meeting.

Examining the Viability

"The banks have been asked to look at the viability of individual MSME before making the restructuring scheme applicable to MSMEs. The default is to see that maximum unit get benefitted but while extending the benefits, the viability aspect also needs to be considered because, without that, it would not be possible to implement the restructuring scheme," Das said.

Viability is among the key parameters for the scheme implementation to judge the application. Banks are supposed to present their research to the board and formulate a policy for examining the viability of MSMEs and regular monitoring of the restructured accounts. Additionally, RBI is monitoring the liquidity conditions of NBFCs constantly and will soon meet their representatives for further discussions.

Das also mentioned that the majority of the MSME functioning falls under the jurisdiction of Indian government whereas RBI, in particular, handles the commercial aspect.

Liquidity Crunch?

The RBI governor has clarified that the economy is not facing any liquidity shortage at the moment and if any deficit arises, it would be met accordingly. "RBI would not like a situation where liquidity becomes a kind of loose money. Any infusion of liquidity will have to be carefully considered and has to be need-based," Das said.

He cautioned that excess liquidity could have adverse effects, "therefore, caution and care have to be exercised by the RBI." While liquidity needs in the majority of the sectors are met, there have been various dialogues about the issue of liquidity faced by NBFCs. To better understand the concerns, it is important to have a face-to-face interaction with the representatives, which will take place on January 8, 2019.

Expert Committee

Various issues were raised during the meeting by MSME representative, which Das said would be discussed internally. Notably, an expert committee was formed a day after the announcement of MSME loan restructuring "to identify causes and propose long-term solutions for the economic and financial sustainability of the MSME sector."

The 8-member committee chaired by the former Chairman of Securities and Exchange Board of India, UK Sinha would "review the current institutional framework that is in place to support the MSME sector, study the impact of the recent economic reforms on the sector and identify the structural problems affecting its growth" among other aspects.

The committee is supposed to submit its report by the end of June 2019. As for the restructuring, it has to be implemented by March 31, 2020. While introducing the scheme, the central bank has clarified that the borrower needs to be GST-registered on the date of implementation of restructuring to avail the measure.

Aastha Singal

Entrepreneur Staff

Former Features Writer

A business journalist looking to find happiness in the world of startups, investments, MSMEs and more. Officially started her career as a news reporter for News World India, Aastha had short stints with NDTV and NewsX. A true optimist seeking to make a difference, she is a comic junkie who'd rather watch a typical Bollywood masala than a Hollywood blockbuster. 

Related Topics


21 Productive Things to Do During Your Commute

How to use this frustrating "wasted time" to get smarter, more focused and re-energized.


5 Steps to Communicate Like a Boss

Here are five tips leaders can use to improve their communication skills.

News and Trends

Why Government May Ban Related Party Sales Of E-commerce, Food Delivery Startups

"E-commerce companies are permitted to merely operate a pure-play marketplace i.e. a bridge between the buyer and seller and not sell any goods, even their own products on their platforms," said Praveen Khandelwal, secretary general, CAlT

News and Trends

Student Run Startup Plutus Raises $280,000 Pre-Seed Funding

The fund raised will help Plutus build new tools to expand the monetisation potential for content creators


4 Ways To Negotiate For A Good Salary

Negotiating a salary can be an intimidating task for many, especially for those who are just starting their careers. However, with the right approach and mindset, this can become a smooth and successful process.

Health & Wellness

5 Essential Steps to Expand Your Vision and Start Living Your Dream Life

It's time to break free from your comfort zone and expand your vision. When you refuse to settle for a mediocre life, you can start building a life you love.