RBI gives 60 days additional time before a small loan classified as NPA

With the nation facing a cash crunch and small borrowers not able to repay their loan dues on time, the Reserve Bank of India (RBI) on Monday came to their rescue by easing the norms for classifying a loan into bad.

In a notification to banks, non-banking finance companies (NBFC), NBFC micro-finance institutions (MFI), housing finance companies and others, the RBI said it has received several representations for some more time for small borrowers to pay their loan dues after demonetisation of Rs 500 and Rs 1,000 bank notes.

As a relief to the small borrowers, the RBI has said that banks, NBFCs, housing finance companies, NBFC (MFI) and other entities regulated by it are given additional 60 days time before classifying a loan account sub-standard.

According to RBI, the new norms are applicable only for dues payable between November 1 and December 31 this year.

The RBI told banks, NBFCs, housing finance companies and others that this is a short-term deferment of norms for classification of a loan account as sub-standard due to delay in payment of dues owing to currency crunch.

The central bank has categorically said the delay in payment of loan dues falling between November 1 and December 31 should not result in restructuring of loan accounts.

Dues payable before November 1 and after December 31 this year will be covered by the extant instruction for the respective regulated entity with regard to recognition of NPAs.

As per the RBI`s notification, the additional time is available for the following types of loans and the relevant organisation regulated by it:

Running working capital accounts (OD/CC)/crop loans, with any bank, the sanctioned limit whereof is Rs 1 crore or less.

Term loans, whether business or personal, secured or otherwise, the original sanctioned amount whereof is Rs 1 crore or less, on the books of any bank or any NBFC, including NBFI (MFI). This shall include housing loans and agriculture loans.

Loans sanctioned by banks to NBFC (MFI), NBFCs, housing finance companies, State Cooperative Banks to District Cooperative Central Banks and others. The above guidelines will also be applicable to loans extended by DCCBs.