The Reserve Bank of India on Thursday directed banks to provide ‘additional working capital limit’ to small and medium borrowers hit by demontisation.
“Banks are hereby advised that they may use the facility of providing ‘additional working capital limit’ (approved by their boards) to their MSE borrowers, to overcome the difficulties arising out of such cash flow mismatches also,” the RBI said in a notification. This would be a one-time measure up to March 31, and should thereafter be normalised in fresh working capital assessment cycle, it said.
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Consequent upon withdrawal of legal tender status of Rs 500/1000 and based on feedback that some MSEs are facing temporary difficulties in carrying out their normal business due to cash flow mismatches, the decision was taken, the RBI said.
The share of MSME sector in the country’s GDP is around 40 per cent, while the total employment in the sector is 805.24 lakh.
On Wednesday, the RBI gave borrowers another 30 days over and above the 60 days for repayment of housing, car, farm and other loans worth up to Rs 1 crore before their accounts are classified as NPA. So, borrowers together get 90 days breather from getting the account classified under non-performing asset (NPA) category.