Restructuring of Advances for MSMES

To facilitate meaningful restructuring of MSME accounts that have become stressed, RBI decided to permit a one-time restructuring of existing loans on January 1st 2019, updated on February 11, 2020 and August 6, 2020.


  • Entities that comply with MSME’s definition under MSME act 2006.
  • GST-registered entities as on the date of implementation of the restructuring, (except the ones that are exempt from GST-registration)


  • All Commercial Banks (including Small Finance Banks, Local Area Banks and RegionalRural Banks)
  • All Primary (Urban) Co-operative Banks/State Co-operative Banks/ District Central Cooperative Banks
  • All All-India Financial Institutions
  • All Non-Banking Financial Companies


  • The aggregate exposure, including non-fund-based facilities, of lenders to the borrower does not exceed ₹25 crores as on January 1, 2020.
  • The borrower’s account was a ‘standard asset’ as on March 1, 2020.


  • All related documentation, including execution of necessary agreements between lenders and borrower / creation of security charge / perfection of securities are completed by all lenders
  • The new capital structure and / or changes in the terms and conditions of the existing loans get duly reflected in the books of all the lenders and the borrower.
  • Banks and NBFCs desirous of adopting this scheme shall put in place a Board approved policy on restructuring of MSME advances under these instructions within a month from the date of this circular. The policy shall, inter alia, include framework for viability assessment of the stressed accounts and regular monitoring of the restructured accounts.


  • The restructuring of the borrower account shall be implemented by March 31, 2021.
  • Provision of 5% + the provisions already held, shall be made for the accounts restructured. ButBanks can reverse these provisions at the end of the specified period, if they show satisfactory performance
  • MEANING OF SPECIFIED PERIODperiod of one year from the commencement of the first payment of interest or principal, whichever is later, on the credit facility with longest period of moratorium under restructuring terms
  • MEANING OF SATISFACTORY PERFORMANCE : No payment (interest and/or principal) shall remain overdue for a period of more than 30 days. For Cash Credit, the outstanding in the account shall not be more than the sanctioned limit or drawing power, whichever is lower
  • Post-restructuring, NPA classification of these accounts shall be as per the extant IRAC norms.
  • Any MSME account which is restructured must be downgraded to NPA upon restructuring and will slip into progressively lower asset classification and higher provisioning requirements as per extant IRAC norms. Such an account may be considered for upgradation to ‘standard’ only if it demonstrates satisfactory performance during the specified period.
  • If a standard account earlier falls to NPA category between 2nd March 2020 – Implementation date, then it can be upgraded to STANDARD again (only if restructuring is done according to this circular)


  • Accounts classified as NPA can be restructured; however, the extant asset classification norms governing restructuring of NPAs will continue to apply.
  • GST-registered entities as on the date of implementation of the restructuring, (except the ones that are exempt from GST-registration)

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