NBFC seeks extension of MSME restructuring plan till March 2022

The industry body has also requested the RBI to allow it to restructure some of the MSME loans that were already getting the same relief under the same scheme during the first wave of Kovid-1, but now it is facing challenges.

 Non-banking finance companies (NBFCs) have requested the Reserve Bank to extend the one-time restructuring scheme of MSME advances till March 31, 2022, as these players are unable to revive their business. In February last year, the Reserve Bank approved a one-time restructuring of existing MSME advances, which were classified as ‘norms’ without a downgrade in the asset classification subject to some additional provisions and other compliance.

The deadline for implementation of the scheme was December 31, 2020. In a recent letter to RBI Governor Shaktikitadas, NBFC's industry body FIDC said that due to the second serious wave of COVID-19, micro, small and medium enterprises (MSMEs) were not able to revive their economic activities and needed immediate help from lenders.

"Given the challenging environment for MSMEs and lenders, it will be helpful if the RBI extends the restructuring plan till at least March 31, 2022," the Finance Industry Development Council (FIDC) wrote. NBFC primarily caters to the funding needs of micro, small and medium enterprises (MSMEs), including retailers and wholesalers.

The industry body has also requested the RBI to allow it to restructure some of the MSME loans that were already getting the same relief under the same scheme during the first wave of Covid-1, but now it is facing challenges. FIDC has also requested NBFCs to provide priority status lending (PSL) classification benefits for bank lending on a permanent basis. Earlier this month, the RBI extended the PSL gain for six months till September 30, 2021.

The letter said that under the nding non-lending model, only new loans granted by NBFCs are allowed PSL benefits and non-existent pools of eligible PSLs are not eligible for such classification benefits. The industry body has requested the RBI to allow bank refinancing against the existing unofficial MSME pool created by the NBFC.

In a separate letter to MSME Minister Nitin Gadkari, FIDC requested the resumption of guarantee cover under the Credit Guarantee Fund Scheme for NBFCs (CGS-II) which has recently been revised to 50 per cent. CGS II was created by the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to guarantee micro and small enterprise (MSE) borrowers in terms of extended credit facilities through eligible NBFCs.

The letter said, "We request that the guarantee cover be kindly restored to the previous level of 75 per cent. Especially in these precarious and stressful times, NBFCs can charge an interest rate of up to 18 per cent.

FIDC has urged the government not to limit the lending rate, as the maximum lending rate will be capped at 18 per cent, to defeat the purpose of the CGTMSE scheme for NBFCs. With the COVID-19 epidemic and the current situation of MSMEs and other small borrowers, the industry body urged to re-launch the interest submission scheme and extend it to both MSMEs and retailers and wholesalers.