Credit and finance for MSMEs: The Reserve Bank of India had last year asked non-banking financial companies (NBFCs) to classify borrower accounts as overdue as part of their day-end process irrespective of the time of running such process. Similarly, lenders were asked to classify accounts as special mention accounts (SMA) as well as NPA as per the day-end process for the relevant date. This meant that if the payment takes more than 30 days from let’s say February 17, then the overdue amount will turn delinquent and NPA after 90 days. This is in contrast to the earlier month-end consideration to classify the account as delinquent or NPA in case the payment is not received. The norms came into effect on October 1, 2022.
Also read: NBFC loans to MSMEs jump 14% in FY22 from 2.8% in FY21: RBI report
According to Raman Aggarwal, Director at NBFC body Finance Industry Development Council (FIDC) this would bring the NPA tag strictly after the 90th day for the MSME which will be prolonged unless the borrower repays the entire amount. “This means that credit availability will be a big challenge,” Aggarwal said as he asked for flexibility in the norms considering the fragility of cash flows of MSMEs in an interaction with FE Aspire at the ScaleUp Summit held in December 2022. Listen in!
