On Thursday, the Reserve Bank of India (RBI) said that it will be extending the deadline on its one-time debt restructuring scheme from 31 March 2020 to 31 December 2020.
The announcement comes after Finance Minister Nirmala Sitharaman in her Union Budget 2020 speech said that the government has asked RBI to extend the window till 31 March 2021.
"More than five lakh MSMEs have benefitted from restructuring of debt permitted by RBI in the last year. The restructuring window was to end on March 31, 2020. Government has asked RBI to consider extending this window till March 31, 2021," Sitharaman said.
RBI said that considering the importance of Micro, Small and Medium Enterprises (MSMEs) sector to the Indian economy (contributes to 28 percent of GDP and creates employment for about 11 crore people), the one-time restructuring of their loans that were in default but 'standard' as on January 1, 2019, was permitted without an asset classification downgrade.
"As the process of formalisation of the MSME sector has a positive impact on financial stability and this process is still underway, it has been decided to extend the benefit of one-time restructuring without an asset classification downgrade to standard accounts of GST registered MSMEs that were in default as on January 1, 2020. The restructuring under the scheme has to be implemented latest by December 31, 2020," it said.
The scheme was launched to provide relief to the MSME sector that was hurt by demonetisation and subsequent implementation of goods and service tax (GST).