5 Relief measures announce by RBI in view of COVID-19 beneficial to MSME

1) Reduction in Cash Reserve Ratio (CRR)

The Cash Reserve Ratio (CRR) of all banks has been reduced by 100 basis points, i.e., 3% of net demand and time liabilities, w.e.f. March 28, 2020. This measure is expected to inject Rs. 1,37,000 crore across the banking system. Besides this, it has also been decided to reduce the minimum daily CRR balance from 90% to 80%, effective from March 28, 2020, which will be available up to June 26, 2020. These steps are part of the 5 RBI relief measures for MSMEs amid COVID-19 and form a significant component of the overall RBI relief measures MSME package designed to support small and medium enterprises during the pandemic.

2) Rescheduling of Payments

A moratorium of 3 months on payment of all instalments of term loan falling due between March 1 and May 31, 2020, has been announced. The accumulated accrued interest shall be recorded immediately after the completion of this period. This measure forms a key part of the MSME COVID-19 support initiatives introduced to ease financial stress on small and medium enterprises.

3) Ease of working capital finance

In respect of working capital facilities sanctioned in the form of CC/OD to borrowers facing stress, the lending institutions may recalculate ‘drawing power’ by reducing margin and/or reassessing the working capital cycle. Such relief is available up to 31st May 2020. This is part of the RBI MSME benefits aimed at providing financial support to small and medium enterprises during challenging times.

4) Classification as Special Mention Account (SMA) and Non-Performing Asset (NPA)

As the moratorium, deferment, or recalculation of the ‘drawing power’ is being provided to the borrowers, it will not be treated as a concession or change in terms and conditions of long agreements under para 2 of the Annex to RBI (Prudent Framework for Resolution of Stressed Assets) Directions, 2019. The rescheduling of payments, including interest, will not qualify as default for supervisory reporting and reporting to Credit Information Companies (CICs) by the lending institutions. These measures form a part of the MSME financial relief India, RBI schemes for MSME, and broader COVID-19 MSME relief India initiatives designed to support small and medium enterprises during the pandemic.

5) Extension of realization period of export proceeds

The time period for realization and repatriation of export proceeds of exports made up to July 31st, 2020, has been extended to 15 months from the date of export, whereas it is presently 9 months from the date of export. This extension is part of the broader MSME loan moratorium RBI measures aimed at providing relief and liquidity support to small and medium enterprises.