Banks told by RBI to raise working capital limit for MSMEs

In a relief to small and medium enterprises hit by the cash crunch in the market and the consequent slowdown in the business, Reserve Bank on December 29 said banks may provide ‘additional working capital limit’ to Micro, Small and Medium Enterprises (MSME) borrowers.

This would be a one-time measure up to March 31, and should thereafter be normalised in fresh working capital assessment cycle, it said.

“Banks are hereby advised that they may use the facility of providing… ‘additional working capital limit’ (approved by their boards) to their MSE borrowers, to overcome the difficulties arising out of such cash flow mismatches also,” RBI said in a notification.

Consequent upon withdrawal of legal tender status of Rs 500/1000 and based on feedback that some MSEs are facing temporary difficulties in carrying out their normal business due to cash flow mismatches, the decision was taken, the central bank said.

The contribution of micro, small and medium enterprises sector, including service segment, to the country’s GDP, is around 40 percent, while the total employment in the sector is 805.24 lakh.

RBI, on Wednesday, gave borrowers another 30 days over and above the 60 days for repayment of housing, car, farm and other loans worth up to Rs 1 crore before their accounts are classified as NPA.

So, borrowers together get 90 days breather from getting the account classified under non-performing asset (NPA) category.

The above dispensation will apply to dues payable between November 1 and December 31, 2016, it said. The demonetisation of high-old currency notes has affected normal banking activities including clearing of cheques.

Source: The New Indian Express