The Hindu Business Line : Debt revamp: SMEs get a leg up from RBI

TO improve the flow of credit to Small and Medium Enterprises (SME), the Reserve Bank of India has announced detailed guidelines to ensure the restructuring of debt of all eligible SMEs. This will be at terms that are as favourable as the corporate debt restructuring mechanism in the banking sector, said an RBI notification.

Banks are supposed to work out the restructuring package and implement it within a maximum period of 60 days from the date of receipt of requests.

Banks can decide on the acceptable viability benchmark, consistent with the SME becoming viable in seven years and the repayment period for the structured debt not exceeding 10 years.

The guidelines would be applicable to entities, which are viable or potentially viable. Accordingly, all non-corporate SMEs irrespective of the level of dues to banks would be considered eligible.

Guidelines would also be applicable to all corporate SMEs, which are enjoying banking facilities from a single bank, irrespective of the level of dues to the bank or which have funded and non-funded outstanding up to Rs 10 crore under multiple/consortium banking arrangement. Separate guidelines will be issued for corporate SMEs with an outstanding of Rs 10 crore and above. Accounts involving wilful default, fraud or those, which have been classified by banks as "loss assets", will not be eligible for restructuring.

With respect to Board of Industrial and Financial Reconstruction (BIFR) cases, banks are supposed to ensure completion of all formalities in seeking approval from BIFR before implementing the package.

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