Requirement of restructuring of MSME loans after completion of moratorium

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Mumbai, Ta. Saturday, June 27, 2020

Once the moratorium is completed in August, there will be a need for massive restructuring of loans for micro, small and medium enterprises (MSMEs).

After Unlock-1, most of the small businesses in the country have resumed operations but due to lack of demand, industries, especially MSMEs, are under severe stress. To protect the industry from the effects of Covid-18, the Reserve Bank has provided a moratorium on loans for six months, which expires in August.

Banks had sought one-time restructuring from the Reserve Bank of India (RBI) in view of the strained industries, including the MSME sector, but no decision was taken at the RBI's board meeting.

There is no denying the possibility of widespread pressure on banks to make provision for such loans if strained loans are not restructured.

Fifty per cent of the borrowers in the MSME sector have taken advantage of the moratorium. Provisioning could have a serious impact on banks' balance sheets, banking sector sources said.

It remains to be seen how the cash flow in MSMEs will increase. An estimate of MSMEs' financial position will be available from September, a banker said.


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