RBI relief to NBFCs, MSMEs; banking regulator defers implementation of NPA circular till 30 September

In a big relief to the NBFCs, the Reserve Bank of India (RBI) has deferred implementation of its 12 November circular on the Non-Performing Assets (NPAs) till 30 September 2022. The banking regulator's relief came in after the Non Banking Finance Companies apprised the Central Bank about the difficulties being faced by the sector.

The move is expected to help Micro, Small and Medium Enterprises (MSMEs) in India as the loans extended to them will not be tagged as NPAs on the immediate basis and they will be able to seek further loans to run their businesses. The small businesses have been hit because of the pandemic.

Zee Business’ Anurag Shah spoke to Raman Aggarwal, Director of Finance Industry Development Council (FIDC) to know how he views this decision. 

Aggarwal said that it was imperative to look at this development from the perspective of borrowers because NBFC caters to small businesses and MSMEs. 

This RBI circular said that non-performing assets (NPA) classification should be done on a day-end basis. This means that if any business has taken any loan from NBFCs and hasn’t paid any instalment within a period of 90 days, it will be mandatory for the borrower to declare NPA on the same day while closing the account.

This clause was implemented for Banks and all NBFC as well. But the upgradation options were only available for Banks. 

Because of the clause by RBI, small borrowers would have been exposed to the risk of being labelled as NPA and will not get money from the system, Aggarwal said.

To avoid this FIDC requested to distinguish between big corporate loans and small business loans, the Director said adding that FIDC urged the banking regulator to bring  separate clauses for banks and NBFC. 

FIDC has requested that the loan under Rs 2 crore be exempted from this clause by RBI, Aggarwal added.

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#RBI की ओर से NBFCs को दी गई बड़ी राहत
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— Zee Business (@ZeeBusiness) February 16, 2022