After initiative of the Government of providing loan approved in 59 minutes, here is a new year gift for small businesses. To benefit numerous micro, small and medium enterprises (MSMEs) suffering from debts, the Reserve Bank of India (RBI) has come up with a one-time restructuring grant. Wherein, banks and non-banking finance companies (NBFCs) will grant debt relief of up to Rs.25crore to MSMEs dealing in various categories such as electricals, automotive, and more.
This segment plays a significant share in increasing India’s GDP, employment generation and more. Since demonetization and GST have largely affected MSMEs, this restructuring grant will be a great relief for small and medium businesses to deal with a cash crunch. In this league, registration of MSMEs on GST network will accelerate and support bank’s loan lending ability. GST will allow banks to track the credit score and cash flow of the business.
According to this relief package by RBI, lenders will alter or allow one-time restructuring of loan for businesses getting a loan of up to Rs25 crore as on January 1, 2019. Every bank and NBFC needs to formulate policy towards this scheme, get it approved and implemented by March 31, 2020. Additionally, a provision of 5% will be made on the outstanding loan and exigency funds saved to cover losses.
According to the RBI, the restructuring must be executed by 31st March 2020. Banks will need to make a provision of 5% towards this scheme. Those MSMEs who are still not relieved from GST will need to be listed on the GSTN on the date of restructuring as it will give banks better information about the MSMEs cash movements and wealth.