In a bid to support Micro- Small and Medium Enterprises (MSME) over the cash crunch issue, the Government of India (GoI) has approached the Reserve Bank of India (RBI) to ease norms for non-performing assets (NPAs) or bad loans in case of small and mid-sized businesses. The MSME ministry is looking for an extension of the NPA classification period from the current 90-day window to 180 days and RBI is making efforts to get it further extended.
Generally, an accounts turns NPA if it is not serviced for 90 days and in case of small businesses and SMEs, payments usually delayed. Once they miss the 90-day period and fall in the NPA category, their credit line is cut. In the absence of vibrant factoring or trade receivable market, small business and SME face the issue of timely credit availability.
As of now, banks are sitting on unrecognised stressed loans worth approximately Rs 7.7 lakh crore in corporate and SME sectors and expect around 35 per cent of them to slip into the NPA category in the next few months.