Govt asks banks to deal softly while recovering loans from MSMEs

Govt asks banks to deal softly while recovering loans from MSMEs

New Delhi, Jan 9 Amid economic slowdown, the government has provided a relief to Micro, Small and Medium Enterprises (MSMEs) as it has asked banks to deal with ease while recovering loan amount from small businesses.

As per the norms, banks have to declare an account as NPA, if the repayment is not done for three months. However, banks have the discretion to allow the account to continue as normal if a partial payment is done.

Due to economic slowdown and inability of MSME sector to repay on time, the finance ministry has asked bankers to deal softly during recoveries of loan amount and keep the account active.

After, Finance Minister Nirmala Sitharaman, On September 19, had asked banks not to declare any stressed loan account of MSMEs as NPA till March 2020 and work on recasting debt, the banks are refraining from extending big loan amount to MSMEs.

According to RBI report, loans to micro and small businesses shrank 3.4 per cent since the beginning of FY20, advances to medium-sized firms contracted 3.6 per cent.