The Reserve Bank of India (RBI) on Friday expanded the borrowing limit to Rs 50 crores for small businesses that have taken a hit due to the ongoing COVID-19 crisis.
The announcement by RBI comes as states impose strict lockdowns to battle the second wave of the coronavirus pandemic in India, leaving small businesses vulnerable to their debts.
RBI had unveiled various measures in May to help lenders tide over mounting bad loans and give some borrowers more time to repay their debts.
The debt moratorium was available to individuals and small and medium enterprises that did not restructure their loans in 2020 and were classified as standard accounts till March 2021.
“It has been decided to expand the coverage of borrowers under the scheme by enhancing the maximum aggregate exposure threshold from ₹25 crore to ₹50 crore for MSMEs, non-MSME small businesses and loans to individuals for business purposes”, RBI said in a statement.
During the last financial year, the RBI had introduced a one-time restructuring plan for small borrowers and companies that allowed banks to extend repayment periods for up to two years.
Around 800,000 borrowers with total loans worth 1.2 trillion rupees enlisted in that scheme. This translated to less than 5% of the total industry-wide loan book.
“The measures announced today, in conjunction with other steps taken so far, are expected to reclaim the growth trajectory from which we have slid”, RBI said.
Earlier in the day, Reserve Bank of India kept interest rates at record lows and announced additional bond purchases to support the economic recovery.
'The decision of the RBI Monetary Policy Committee to stay on course with the accommodative stance with a focus on the equitable distribution of liquidity sends an important message from the central bank to be reaching out to those affected the most by COVID-19 pandemic, through increased and wider windows for soft lendings”, Deepak Sood, ASSOCHAM secretary general said.