1. RBI asks banks to enhance working capital limit for MSMEs

RBI asks banks to enhance working capital limit for MSMEs

In a relief to small and medium enterprises hit by demonetisation, Reserve Bank today said banks may provide 'additional working capital limit' to MSME borrowers.

By: | Mumbai | Published: December 29, 2016 8:05 PM
rbi-660 This would be a one-time measure up to March 31, and should thereafter be normalised in fresh working capital assessment cycle, it said. (AP)

In a relief to small and medium enterprises hit by demonetisation, Reserve Bank today said banks may provide ‘additional working capital limit’ to MSME borrowers.  “Banks are hereby advised that they may use the facility of providing… ‘additional working capital limit’ (approved by their boards) to their MSE borrowers, to overcome the difficulties arising out of such cash flow mismatches also,” RBI said in a notification.

This would be a one-time measure up to March 31, and should thereafter be normalised in fresh working capital assessment cycle, it said.

Consequent upon withdrawal of legal tender status of Rs 500/1000 and based on feedback that some MSEs are facing temporary difficulties in carrying out their normal business due to cash flow mismatches, the decision was taken, the central bank said.

Prime Minister Narendra Modi on November 8 announced scrapping of Rs 500/1,000 notes, which resulted in cash crunch in the market and slowdown in business.

The contribution of micro, small and medium enterprises (MSME) sector, including service segment, to the country’s GDP is around 40 per cent, while the total employment in the sector is 805.24 lakh.

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Yesterday, the RBI gave borrowers another 30 days over and above the 60 days for repayment of housing, car, farm and other loans worth up to Rs 1 crore before their accounts are classified as NPA.

So, borrowers together get 90 days breather from getting the account classified under non-performing asset (NPA) category.

The above dispensation will apply to dues payable between November 1 and December 31, 2016, it said. 

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