Banks and non-bank lenders could restructure up to Rs 10,000 crore in loans to micro, small and medium enterprises without classifying them as bad debt, according to an estimate by rating agency ICRA. This, after the Reserve Bank of India gave in to demands for easier loan restructuring terms for small business.
The ‘one-time’ restructuring scheme announced on Tuesday allows for loan terms — such as interest rates and tenures — to be revised without a change in asset classification from standard to non-performing. Known as regulatory forbearance in industry parlance, such restructuring was widely misused for evergreening of bad corporate loans in the 2011-13 period.
The benefits were withdrawn for large corporate loans in 2015 but have now been brought back for MSME loans up to Rs 25 crore. Loans which were in default as of January 2019, but are not yet tagged as non performing assets, will be eligible for restructuring under the new scheme.
According to data collated by Small Industries and Development Bank of India (SIDBI) and TransUnion Cibil, total loans to non-individual MSME borrowers under the Rs 25 crore mark stood at around Rs 13 lakh crore, in September 2018. Of this, banks contributed around Rs 10 lakh crore, while NBFCs added the rest.