Banks Propose Opt-In Moratorium For Msmes As Global Tensions Rise

(MENAFN- KNN India) New Delhi, Apr 13 (KNN) Indian banks have approached the Reserve Bank of India (RBI) seeking approval for a targeted loan repayment moratorium for micro, small and medium enterprises (MSMEs), citing economic disruptions arising from the ongoing US-Iran conflict

The proposal, submitted by the Indian Banks' Association (IBA), recommends an“opt-in” moratorium framework under which relief would be extended only to MSMEs that formally request it. The move is aimed at cushioning vulnerable businesses from potential demand shocks and income disruptions linked to the conflict, according to NDTV.

“The ongoing US-Iran conflict is likely to materially impact demand for MSME-manufactured products, thereby affecting their cash flows and repayment capacity,” a senior banker said, noting that the crisis could have broader second- and third-order economic effects.

The RBI is currently reviewing the proposal and is expected to take a decision in due course. The central bank has already extended export credit relief measures until June 30 to help exporters manage supply chain disruptions and logistical challenges stemming from the geopolitical situation.

Banking sector representatives have pointed out that the moratorium introduced during the COVID-19 pandemic did not lead to a significant surge in non-performing assets, suggesting that a similar calibrated intervention could be effective under current conditions.

Data from Small Industries Development Bank of India (SIDBI) indicates that total MSME credit outstanding stood at Rs 67.6 lakh crore as of December 2025, registering a 16 per cent year-on-year growth and a five-year compound annual growth rate of 17 per cent, driven by strong demand for secured lending.

Despite emerging external pressures, asset quality in the MSME segment has improved, with serious delinquencies (90–720 days past due) declining to 1.87 per cent-the lowest level recorded in the past five years.
Banks believe that a temporary, targeted moratorium could help sustain credit discipline while providing immediate liquidity support to stressed MSMEs amid global uncertainty.

(KNN Bureau)

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