RBI to restructure stressed loans of MSMEs

November 20, 2018

The Reserve Bank of India (RBI) and the government on Monday agreed to refer to an expert committee the appropriate size of reserves that the RBI must hold, and that restructuring of stressed loans of small businesses would be considered by the central bank, according to PTI. At the meeting, the central board, which met amid the ongoing tussle between the Finance Ministry and the central bank over various issues, discussed the restructuring scheme for stressed MSMEs.

The board advised the RBI to consider a scheme for restructuring of stressed standard assets of MSME borrowers, with aggregate credit facilities of up to Rs 25 crore, subject to conditions necessary for ensuring financial stability.

In the build up to the meet, the Finance Ministry had sought discussions under Section 7 of the RBI Act, which has not been used before. Under this, the government can be empowered to issue directions to the RBI Governor.

Last month, RBI Deputy Governor Viral Acharya had pitched for the independence of the central bank, saying that any compromise could have an adverse impact on the economy. The Monday meeting, which has drawn intense media attention, was attended by most of the RBI’s 10 independent directors, including Tata Sons Chairman N Chandrasekaran.

The next meeting of the central board of the RBI is scheduled to be held on December 14.

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