"

Understanding RBI's One-Time Loan Restructuring for MSMEs

" "

Introduction

" "

The Reserve Bank of India (RBI) has introduced a one-time loan restructuring scheme for Micro, Small and Medium Enterprises (MSMEs) that were adversely impacted by the Goods and Services Tax (GST). This relief measure was designed to help these enterprises manage their financial burdens and avoid the risk of their accounts becoming Non-Performing Assets (NPAs). The scheme is currently available until March 2021.

" "

Eligibility Criteria and Impact of GST

" "

Any MSME unit whose business operations have been significantly affected by the implementation of GST can apply for this restructuring scheme. The main aim is to provide MSMEs with a temporary reprieve to postpone their loan repayments for up to 180 days. This adjustment helps businesses better manage their cashflows during a challenging period and avoid the long-term implications of an NPA designation.

" "

Applying for One-Time Restructuring

" "

Borrowers who are facing difficulty in repaying their installments as per the terms of the loan can apply to restructure their loan. This application should be made before any account is termed as an NPA or before the possibility of closing the account or unit arises. Restructuring the loan provides a one-time flexibility to manage these challenging financial situations, thereby allowing the business to recover during the transitional phase.

" "

Benefits of One-Time Restructuring

" "

The primary benefit of this restructuring is the postponement of loan repayment, which is a crucial relief for MSMEs. By delaying the repayment period, businesses can conserve cash flow and reallocate funds to more pressing financial needs. This scheme also preserves the enterprise's creditworthiness, as the NPA status is avoided. Additionally, it provides a window for businesses to strategize and implement the necessary measures to get back on track.

" "

How to Avail the One-Time Restructuring Scheme

" "

To avail the one-time loan restructuring, MSME units need to approach their financial institutions and submit a formal request. The business should provide detailed information about the adverse impact of GST and the need for restructuring. Financial institutions will then assess the request and, if approved, will issue a formal acknowledgment and terms of restructuring. Once approved, the business can proceed with the restructured payment plan without the risk of being classified as an NPA.

" "

Conclusion

" "

The RBI's one-time loan restructuring scheme for MSMEs is a valuable tool in the face of the challenges posed by GST. It provides much-needed financial relief and ensures that businesses can navigate through the period of transition without the immediate threat of default. As the scheme is available until March 2021, it is crucial for eligible MSME units to understand their options and take advantage of this opportunity to secure their financial future.

"