MSME revival package yet to take off as banks wait for RBI norms

The scheme, which was to provide ₹20,000 crore equity support to stressed and NPA MSMEs, was approved by the Union Cabinet on June 1.

Almost one month after Union Finance Minister Nirmala Sitharaman announced the revival package for stressed micro, small and medium enterprises, the scheme is yet to see the light of the day.

The scheme, which was to provide ₹20,000 crore equity support to stressed and NPA MSMEs, was approved by the Union Cabinet on June 1.

Aimed at 2 lakh units

According to the scheme, the banks were expected to provide subordinate-debt to promoters of stressed MSMEs, upto 15% of their existing stake in the unit subject to a maximum of ₹75 lakh. This would have helped two lakh stressed MSMEs. However, the scheme is yet to take off as the Reserve Bank of India (RBI) is yet to issue the guidelines for the scheme.

“This is also a kind of debt restructuring scheme which would mean making higher provision. So, RBI’s approval is required for relaxing the higher provision requirement,” said a banker.

Revival package: Tranche 1: Business including MSMEs (May 13, 2020) | Tranche 2: Poor, including migrants and farmers (May 14, 2020) | Tranche 3: Agriculture (May 15, 2020) | Tranche 4: New horizons of growth (May 16, 2020) |Tranche 5: Government reforms and enablers (May 17, 2020)

A debt recast scheme for MSME, which are standard account is already in force. On January 1, RBI allowed banks to recast debt of MSMEs which are still standard accounts on the books of the bank, as on January 1. Initially, the scheme was allowed till March 31 but later extended till December 31.

“I think the RBI will get involved in issuance of the guidelines. Because, ultimately you are taking about restructuring. RBI will have to come out with a detailed set of guidelines to the banks on how it could be implemented on ground,” said Anil Bhardwaj, Secretary General, Federation of Indian MSMEs (FISME).

MSME players said the move to revive the units through the subordinate debt scheme was an unique one and was a much needed measure.

“This is a much needed great move as firms that are revivable but currently NPA were hoping that the measure will be speedily implemented which would have increased the chance of revival drastically,” said the promoter of a mid-sized enterprise.

“As an additional measure, as not all banks may have appetite for this scheme, portability of such accounts to banks that have the appetite would ensure greater impact and help off-court resolutions,” the promoter said.

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