Cash crunch: RBI eases repayment norms for small loans

With India facing a cash crunch and small borrowers finding it difficult to repay their loan dues on time, the Reserve Bank of India on Monday eased the norms for classifying a loan as a non-performing asset (NPA) or bad loan.

In a notification to banks, non-banking finance companies (NBFCs), microfinance institutions (MFIs), housing finance companies and others, the RBI provided an additional 60 days for repayment of housing, car, farm and other loans worth up to Rs1 crore, after it received several representations for some more time for small borrowers to pay their loan dues after demonetisation of Rs500 and Rs1,000 bank notes. 

According to RBI, the new norms are applicable only for dues payable between 1 November and 31 December this year, telling lenders that this is a short-term deferment of norms due to the currency crunch.

The central bank has categorically said the delay in payment of loans falling due between 1 November and 31 December 2016 should not result in restructuring of loan accounts.

Dues payable before 1 November and after 31 December 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 Rs1 crore or less.

Term loans, whether business or personal, secured or otherwise, the original sanctioned amount whereof is Rs1 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.

These guidelines will also be applicable to loans extended by DCCBs.