Banks to move RBI seeking lenience on MSME Loans

Delay in repayment of loans should not be classified default to a limited degree in time

In the context of the novel corona outbreak, banks have planned to move the Reserve Bank of (RBI), soliciting regulatory clemency on loans disbursed to the micro, small and medium enterprises (MSMEs), as debtors in this segment could trail in loan repayments.

Due to unfortunate and stressed out circumstances induced by COVID-19 pandemic, banks, under the tutelage of the Indian Banks’ Association, are going to request the banking regulator to exercise forbearance  on what is considered as an upper limit for recognising default in loan repayment.

Although the liquidity taps — rupee as well as dollar — opened by RBI have been valuable, bankers’ main concern is making of provisions in the absence of breathing space from the RBI on income recognition and asset classification norms, should loans expended to MSMEs stumble.

Sticking to making provisions as per the standard regulatory recommendation would lead to banks’ bottom lines getting knocked.

 

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