In a move that will greatly benefit MSME’S, the government has approached the Reserve Bank of India to relax norms for bad loans and Non-Performing Assets (NPA) in the case of MSME’s.
The proposal aims at increasing the NPA classification period from the current 90 days to 180 days. Due to variability in cash flow, payments from Small Businesses get delayed at times. If they are not able to pay within 90 days the loan is classified as an NPA and the credit of the small business is cut.3
The government is trying to sensitize lending institutions to the challenges faced by small businesses. By extending the NPA classification, small businesses will face lesser hurdles when applying for credit.
Source: The Economic Times.