While maintaining a status quo, the Reserve Bank of India (RBI) today provided major relief to MSME borrowers, registered under the Goods and Services Tax (GST), by extending their repayment of debt deadline. 
 
RBI said, "It has been represented to us that formalisation of business through registration under GST had adversely impacted the cash flows of the smaller entities during the transition phase with consequent difficulties in meeting their repayment obligations to banks and NBFCs."
 
As per the new guidelines, RBI says GST-registered MSMEs - their overdue amount as on September 1, 2017 and payments due September 1, 2017 and January 31, 2018, be allowed by banks and NBFCs to be paid not later than 180 days from their original due date, without a downgrade in asset classification.
 
It needs to be noted that these MSMEs exposure have aggregate exposure does not exceed  Rs 25 crore as of January 31, 2018 in banks and NBFCs . 
 
Currently, banks and NBFCs  in India generally classify a loan account as Non-Performing Asset (NPA) based on 90 days and 120 days delinquency norms, respectively.
 
However, the MSME borrowers shall continue to be classified as a standard asset in the books of banks and NBFCs subject to the following conditions:

  • The borrower is registered under the GST regime as of January 31, 2018.
  • The aggregate exposure, including non-fund based facilities, of banks and NBFCs, to the borrower does not exceed ₹ 250 million as of January 31, 2018.
  • The borrower’s account was standard as of August 31, 2017.
  • The amount from the borrower overdue as of September 1, 2017 and payments from the borrower due between September 1, 2017 and January 31, 2018 are paid not later than 180 days from their respective original due dates.
  • A provision of 5% shall be made by the banks/NBFCs against the exposures not classified as NPA in terms of this circular. The provision in respect of the account may be reversed as and when no amount is overdue beyond the 90/1201 day norm, as the case may be.
  • The additional time is being provided for the purpose of asset classification only and not for income recognition, i.e., if the interest from the borrower is overdue for more than 90/1202 days, the same shall not be recognised on accrual basis.

In its sixth bi-monthly monetary policy review for FY18, RBI kept the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6%.