(MENAFN- KNN India)
New Delhi, Jan 13 (KNN) The government is developing a new framework for revival and rehabilitation of struggling micro, small, and medium enterprises (MSMEs), aimed at simplifying the loan restructuring process.
The updated framework, dubbed FRR 2.0, will replace the existing 2015-16 guidelines that cover MSMEs with debt up to Rs 25 crore, as reported by Livemint.
The initiative comes as MSMEs continue to face challenges in securing and repaying loans, despite their significant contribution to the economy.
These enterprises, numbering over 58 million, account for approximately one-third of India's gross value added and contributed to more than 45 per cent of exports between April 2023 and May 2024.
The sector also employs over 216 million people as of January 2025, according to the government's Udyam portal.
The current framework requires lenders to develop debt recovery plans and streamline enterprise operations. However, industry experts note that many banks have not established the mandated committees for loan restructuring, despite directives fr0m the government, Reserve Bank of India (RBI), and Supreme Court intervention.
The Supreme Court ruled in August 2024 that lenders must classify stressed MSMEs under the special mention account (SMA) status before categorising loans as non-performing assets (NPAs).
The court mandated that banks can only invoke the SARFAESI Act after loans become NPAs, requiring them to follow the government and RBI's framework for revival and rehabilitation until then.
Industry bodies suggest that extending credit lines to MSMEs fr0m 90 to 180 days before NPA classification, waiving existing penalties for delayed repayments, and offering more flexible repayment plans could potentially save 1.2 million jobs.
The government has already taken steps to support the sector, including the sanctioning of a Rs 20,000-crore Subordinate Debt scheme for stressed MSMEs announced in August 2024.
Under the current definition, micro enterprises are classified as those with investments under Rs 1 crore and revenue under Rs 5 crore, small enterprises with investments under Rs 10 crore and revenue under Rs 50 crore, and medium enterprises with investments under Rs 50 crore and revenue below Rs 250 crore. The MSME ministry has not yet responded to queries about the new framework's specifics.
(KNN Bureau)
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