Delhi, 11 March (H.S.): Over the last five years, total advances to the MSME sector have steadily increased, accompanied by a continual decline in gross NPAs and NPA ratios. Provisional data for FY 2025, as of December 31, 2024, confirms this downward trend.
Various measures have been implemented to resolve NPA issues, including a regulatory framework for compromise settlements and technical write-offs, allowing for the transfer of stressed assets to eligible entities such as banks and ARCs. ARCs can now acquire loans identified as fraudulent.
The Ministry of MSME introduced a ‘Framework for Revival and Rehabilitation’ in 2015 to aid stressed MSMEs. Banks are mandated to develop loan policies, establish recovery cells, set recovery targets, and enhance information sharing among lenders.
The RBI’s regulatory framework aims to protect customer interests and maintain financial stability, focusing on risk profiles and adopting a proactive supervisory approach to identify vulnerable sectors and borrowers.
The Government has implemented comprehensive measures to curb Non-Performing Assets (NPAs), particularly for Micro, Small, and Medium Enterprises (MSMEs).
Key initiatives include the operationalization of a pre-packaged insolvency resolution process (PPIRP) under the Insolvency and Bankruptcy Code (IBC), aimed at providing an efficient insolvency resolution for MSMEs. This process ensures quick and cost-effective outcomes while minimizing business disruptions and preserving employment.
The Reserve Bank of India (RBI) introduced a Prudential Framework for Resolution of Stressed Assets in 2019, promoting early recognition and time-bound resolution of stressed assets, incentivizing lenders for proactive resolution plans.
Additional measures during the COVID-19 pandemic included extending moratoriums on MSME loans and recalculating Drawing Power (DP) by lowering margins and reassessing working capital. In the 2024-25 Union Budget, a new mechanism was announced to facilitate continued bank credit to stressed MSMEs, enhancing support during challenging times.
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Hindusthan Samachar / Jun Sarkar
