With a purpose to benefit thousands of loan-debt ridden small and medium sized businesses, the RBI has introduced a new one-time restructuring grant for MSME (Micro, Small and Medium Enterprises) for loans worth up to Rs 25 crore.

The small and medium businesses aka MSME are an important ingredient of Indian economy and their affect to the gross domestic product (GDP), exports, industrial output and employment generation. Apparently, the MSME sector has faced highest disruptions after demonetisation in 2016, followed by the introduction of GST taxation scheme in July 2017. Considering this, the government has been pushing the central bank to introduce plans and schemes to provide relief to the economically hit MSME sector.

On Tuesday, the Reserve Bank of India released a new relief package for MSME that allows lenders to recast loans of stressed businesses for worth of up to Rs 25 crore. That means, the MSME loans up for organisations worth up to Rs 25 crore funding in the default but standard category as on January 1, 2019, will be allowed a one-time restructuring. The new guidelines also saves provisions for 5% outstanding loans as well as the funds set aside to cover potential and reasonable losses. However, the restructuring relief program will be permitted “without an asset classification downgrade” and it has to be implemented by March 31, 2020.

With the introduction of rather lenient loan scheme for MSMEs, the government and the central bank RBI hopes to repair and restore the disrupted majority business sector of India. The authorities have also considered the “importance of MSME in the Indian economy” and believes that it is “necessary at this juncture to take certain measures for creating an enabling environment for the sector”; and ultimately boost up the overall GDP of the country.