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Published on: Jun 24, 2026

Msme Loan Restructuring 2019

The Reserve Bank of India on 1st January 2019 has announced a Msme Loan Restructuring scheme to provide relief for small businesses across the country. Under the scheme, the RBI has allowed for one-time restructuring of existing loans to MSMEs that are in default but not NPA as on 1st January 2019. Such loans restructured under the scheme will not require an asset classification downgrade.

Eligibility

For a loan to be eligible for restructuring under this scheme, the following conditions must be fulfilled:

  1. The aggregate exposure, including non-fund based facilities, of banks and NBFCs to the borrower does not exceed ₹250 million as on January 1, 2019.
  2. The borrower’s account is in default but is a ‘standard asset’ as on January 1, 2019 and continues to be classified as a ‘standard asset’ till the date of implementation of the restructuring.
  3. The borrowing entity is GST-registered on the date of implementation of the restructuring. However, this condition will not apply to MSMEs that are exempt from GST-registration.
  4. The restructuring of the borrower account is implemented on or before March 31, 2020. A restructuring would be treated as implemented if the following conditions are met:
    1. all related documentation, including execution of necessary agreements between lenders and borrower / creation of security charge / perfection of securities are completed by all lenders; and
    2. 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.
  5. A provision of 5% in addition to the provisions already held, shall be made in respect of accounts restructured under these instructions. Banks will, however, have the option of reversing such provisions at the end of the specified period, subject to the account demonstrating satisfactory performance during the specified period.
  6. Post-restructuring, NPA classification of these accounts shall be as per the extant IRAC norms.
  7. Banks and NBFCs shall make appropriate disclosures in their financial statements, under ‘Notes on Accounts’, relating to the MSME accounts restructured under these instructions as per the following format:
    No. of accounts restructured Amount (₹ in million)
  8. All other instructions applicable to restructuring of loans to MSME borrowers shall continue to be applicable.

Implementation

For the implementation of the scheme, Banks and NBFCs must put in place a Board approved policy on restructuring of MSME advances under this scheme within a month from the date of this circular. The policy put forth by the bank must also include a framework for viability assessment of the stressed accounts and regular monitoring of the restructured accounts.

Provisioning

As a general rule, barring the above one-time exception, 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. ‘Specified Period’ means a period 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 the terms of restructuring package. ‘Satisfactory Performance’ means no payment (interest and/or principal) shall remain overdue for a period of more than 30 days. In case of cash credit/overdraft account, satisfactory performance means that the outstanding in the account shall not be more than the sanctioned limit or drawing power, whichever is lower, for a period of more than 30 days.

RBI Circular

The RBI circular on MSME loan restructuring is reproduced below for ready-reference:

 
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Frequently Asked Questions

Common questions about MSME Loan Restructuring 2019: RBI Guidelines & Eligibility.

The MSME loan restructuring scheme allows for one-time restructuring of existing loans to Micro, Small and Medium Enterprises (MSMEs) that are in default but not classified as Non-Performing Assets (NPAs) as on 1st January 2019. Under this scheme, such restructured loans will not require an asset classification downgrade.
To be eligible for restructuring under this scheme, the borrower's aggregate exposure (including non-fund based facilities) from banks and NBFCs should not exceed ₹250 million as on January 1, 2019. The borrower's account should be in default but classified as a 'standard asset' as on January 1, 2019, and continue to be so until the date of implementation of the restructuring.
The restructuring of the borrower's account must be implemented on or before March 31, 2020. For the restructuring to be treated as implemented, all related documentation and necessary changes in the loan terms and conditions must be completed by all lenders.
Yes, the borrowing entity must be GST-registered on the date of implementation of the restructuring. However, this condition does not apply to MSMEs that are exempt from GST registration.
Banks and NBFCs are required to make a provision of 5% in addition to the provisions already held for accounts restructured under this scheme. However, they have the option of reversing such provisions at the end of the specified period, subject to the account demonstrating satisfactory performance during that period.
Post-restructuring, the NPA classification of these accounts will be as per the existing Income Recognition and Asset Classification (IRAC) norms.
Banks and NBFCs must make appropriate disclosures in their financial statements, under 'Notes on Accounts', relating to the MSME accounts restructured under these instructions, including the number of accounts restructured and the amount involved.
The 'specified period' is a period of one year from the commencement of the first payment of interest or principal, whichever is later, on the credit facility with the longest period of moratorium under the terms of the restructuring package.
'Satisfactory performance' means that no payment (interest and/or principal) should remain overdue for a period of more than 30 days. For cash credit/overdraft accounts, it means that the outstanding in the account should not exceed the sanctioned limit or drawing power, whichever is lower, for more than 30 days.
Barring the one-time exception under this scheme, any MSME account that is restructured must be downgraded to an NPA upon restructuring and will slip into progressively lower asset classification and higher provisioning requirements as per the extant IRAC norms. Such an account can be upgraded to 'standard' only if it demonstrates satisfactory performance during the specified period.