MSME Loan Restructuring Guidelines by RBI

MSME Loan Restructuring

MSME Loan Restructuring | Businesses Eligible for MSME Loan | Eligibility Criteria
24 Oct 2020
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With the constant growth of MSMEs (Micro, Small, and Medium Enterprises) in India, lenders now offer exclusive loan products for MSMEs. The government has also introduced loan schemes for businesses under the MSME sector. Numerous financial institutions offer MSME loans to start-ups as well. The Reserve Bank of India (RBI) stated that MSME loan borrowers would be eligible for loan restructuring facility. Small businesses generally take MSME loans to fund their business operations. For instance, they can take the loan for purchasing equipment, raw materials, or expand the business.

Many banks and lending institutions offer MSME loans under government schemes. They are as follows:

  • Credit Guarantee Funds Trust for Micro and Small Enterprises (CGTMSE) scheme
  • Prime Minister’s Employment Generation Programme (PMEGP)
  • Micro Unit Development and Refinance Agency (MUDRA Loan)

MSME Loan Restructuring

The loan restructuring framework for MSMEs has provided relief to a large number of stressed MSME borrowers. Due to the pandemic continuing to disrupt normal functioning and cash flows, the stress in the MSME sector has increased. The MSME loan restructuring framework will have to be implemented by March 31, 2021

This restructuring scheme will cover the weight of existing loans sanctioned to individual borrowers and will help them in making loan repayments according to their current repayment capacity. This loan restructuring will mainly benefit those people who are facing salaries cuts or those who have lost their jobs amid the pandemic situation. The India Ratings and Research Agency stated that in the time period between September 2019 and April 2020, the proportion of rated mid and emerging corporates (MEC) in the loan default category that was around 10% has now increased to 18%. The agency also estimates that 60% of its rated MECs qualify as MSMEs under the new definition.

Businesses Eligible for MSME Loan Scheme

  • Proprietorships
  • Partnership Firm
  • One Person Company
  • Limited Liability Partnership
  • Any association of persons
  • Co-operative societies
  • Limited Company
  • Hindu Undivided Family
  • Producer Company
  • Private Limited Company

New MSME Definition

The following are the criteria for MSMEs dealing in the manufacturing & services sector

Micro Enterprise:

  • Business investment less than Rs. 10 crore
  • Turnover of up to Rs. 50 crore

Small Enterprise:

  • Business investment less than Rs. 10 crore
  • Turnover of up to Rs. 50 crore

Medium Enterprise:

  • Business investment less than Rs. 50 crore
  • Turnover of up to Rs. 250 crore

MSME Loan Eligibility Criteria

  • To be eligible for MSME loan, the applicant must be between 25-55 years of age.
  • A business vintage of more than three years is required.
  • The business should have filed for ITR for at least the past year.
  • The borrower must have a minimum credit score of 750.
  • A clear record of loan repayment in his/her name or the name of the business.

Documents Required

The following are the documents required to apply for an MSME loan.

  • Identity proof such as Aadhar Card, Passport, Voter ID card, etc.
  • Address proof like Electricity bill, Telephone bill or Driving License etc.
  • Proof of business existence such as ITR filings, bank account statements for the past 3 years, etc.
  • 2 Passport-size Photographs.

How to Apply for MSME Loan?

For MSME registration, you can opt for online as well as an offline process. An individual can register for an MSME loan for multiple industries with an individual registration. The following are the steps to apply for MSME loan:

Step 1: To register, log in to udyogaadhaar.gov.in.

Step 2:Fill in the details in the MSME registration form

Step 3:Submit the required documents like your Aadhaar number, Address, bank account details, etc.

Step 4:You can also submit self-certified certificates with the MSME application form

Step 5:After uploading the details, you will receive the registration number for the loan.

MSME financing can be helpful in cases where your business requires financial assistance. In addition to that, relocating a business to a newer or bigger location or investing in a new product line would require a large amount. Business owners can also use MSME loan funds to expand their business and marketing budgets. At Finserv MARKETS, you can easily avail MSME loans for business and use the funds to set-up or grow your business. Business Loans offer low-interest rates with a host of other benefits of the loan like a line of credit facility. MSMEs can avail a loan of up to Rs. 30 Lakhs without any collateral required.

If you are an existing customer at Finserv MARKETS, based on your credit profile and other parameters, you can be eligible for pre-approved offers on Business Loans through the Finserv MARKETS app. With an MSME loan, you get access to a unique Flexi loan facility and get your business loan application approved in just 24 hours. When applying for an MSME loan, ensure that you read all the terms and conditions of your loan agreement carefully before signing it. This will provide you with a seamless process in the later stage of your loan.

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