In a notification, the Reserve Bank of India (RBI) announced that it has come out with a revised framework on restructuring of stressed assets under which it requires lenders to classify a loan as a non-performing asset (NPA) immediately upon restructuring, however the notification doesn’t mention about the micro, small and medium enterprises (MSMEs) under the new Special Mention Account (SMA) norm.
Dr. Yerram Raju, Economist said in media interaction that the MSMEs for long have been not treated fairly by the Reserve Bank when it comes to framework under SMA norm and revival.
Explaining further Raju said that the corporate and the large enterprises have been given a differential treatment whereas the MSMEs are deprived of it.
“Accounts of the corporate are taken as standard asset by the bank but in case of MSMEs they are treated as raw deal”, Raju said.
Explaining further Raju said that since the accounts of MSMEs are differentially treated, the revival and restructuring process also goes for a toss, leading to uncertainty in the sector.
Commenting on the announcement, Debashis Bandyopadhyay, Director Policy at the Federation of Indian Micro and Small & Medium Enterprises (FISME) said that while the Notification re stress the SMA classification, it appears this is more focused to large borrowers; the earlier one was almost MSME focused.
Also with both the Reserve Bank as well as the Finance Ministry time and again mentioning that it is working on a framework for the MSMEs, the sector is eyeing at announcement to address the non-performing assets and stressed accounts of MSMEs.
More over recently RBI announced an extension of up to 180 days to MSMEs to clear their loans to banks and till then consider the loan portfolio as standard.
RBI should immediately issue a clarification that the new SMA norms are not applicable to MSMEs, to avoid confusion, quipped Bandyopadhyay.
RBI said it has issued various instructions aimed at resolution of stressed assets in the economy, including introduction of certain specific schemes at different points of time. In view of the enactment of the Insolvency and Bankruptcy Code, 2016 (IBC), it has been decided to substitute the existing guidelines with a harmonised and simplified generic framework for resolution of stressed assets.
Under the revised framework RBI said, “Lenders shall identify incipient stress in loan accounts, immediately on default, by classifying stressed assets as special mention accounts (SMA)…