The RBI in its Financial Stability Report earlier this month noted that PSBs have actively resorted to restructuring across all plans.
Credit and financing for MSMEs: MSME loan accounts restructured by public sector banks (PSBs) increased 2.1 times over a period of almost a year and a half. Of 6,19,562 accounts involving Rs 22,650 crore restructured as of January 31, 2020, 13.06 lakh accounts with a total amount of Rs 55,333 crore have been restructured as of June 26, 2021, MSME Minister Narayan Rane said in response to a complaint. question in the Lok. Sabha Thursday. Last year’s data was shared by former MoS MoS Anurag Thakur in Rajya Sabha in March 2020. Since 2019, the weakness of the MSME portfolio of banks and NBFCs has attracted regulatory attention, Reserve Bank of India (RBI) allowing restructuring of Temporarily Impaired MSME Loans up to Rs 25 crore.
“During Covid, it is good that the government realized that the MSME sector, which has faced challenges as it does not have deep pockets, needs support. The death rate in MSMEs is very high, but because the government has been able to provide some support, banks have continued to provide resources to the MSME sector. Many MSMEs do not come directly to the banking system for support, they go through nonbank financial entities. Therefore, the government has been kind in the sense that it allowed the flow of credit to NBFCs so that they can continue to support the MSME sector, ”said Charan Singh, former chairman of Punjab & Sind Bank and CEO. of the EGROW Foundation – a public policy organization – Financial Express online.
The RBI in its Financial Stability Report earlier this month noted that while the PSBs have actively resorted to restructuring across all programs, the involvement of private banks (PVBs) was only significant in the Covid restructuring program proposed in August 2020. The overall restructured portfolio of Les PSB stood at Rs 26,190 crore under the January 2019 scheme before dropping to Rs 5,860 crore under the February 2020 scheme. , after Covid, there was a sharp increase to Rs 24,816 crore during the August 2020 schedule. In contrast, PVB stood at Rs 1,364 in February of last year, but rose to Rs 11,027 during the August 2020 program.
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Nevertheless, despite the restructuring, the tension in the MSME portfolio of PSBs remains high with an NPA rate of 15.9% in March 2021 compared to 13.1% in December 2020, even though it is down from 18. , 2% in March 2020. The RBI had asked banks to closely monitor the asset quality of MSME and retail portfolios. “This calls on the banks to consolidate their capital positions while favorable market conditions prevail. The banking sector will have to protect itself specifically against adverse selection bias while being attentive to the demand for credit from productive and viable sectors, ”RBI said in the report.
To resolve MSMEs Covid-19 stress, RBI extended the existing MSME loan restructuring facility (where the overall exposure of all lenders to MSMEs does not exceed Rs 50 crore as of March 31, 2021) without downgrading in the asset classification until September 30, 2021.
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