look news india
New Delhi: In a bid to help micro, small and medium enterprises (MSMEs) and improve their loan repayment capacity, the central government has extended the period for classification of non-performing assets (NPAs) for MSMEs from the existing 90 days to 180 days. The decision on this will be taken up in the full Budget for FY2025.
To help and provide relief to MSMEs, the government may increase the duration of NPA. Currently, the duration of NPA is 90 days, but it is likely to be increased to 180 days.
MSMEs are very important in terms of employment generation in the country. It contributes about 29 percent to the country's gross value addition, while MSMEs contribute about 45 percent to exports. Often MSMEs have difficulty in making timely payments and due to this they are not able to repay the loan on time. The government has made it mandatory to pay within 45 days for goods and services purchased from SMEs from April 2024.
During Corona, the Reserve Bank of India extended the NPA classification period from 90 days to 180 days for a limited period.
There is also a possibility of relaxation in the period of Special Mention Accounts for MSMEs. Special Mention Accounts are a classification given to loan accounts by banks. This helps them identify potential NPA accounts. Special Mention Account Zero is likely to be increased from 30 days to 60 days, Special Mention Account 1 from 60 days to 90 days and Special Mention Account 2 from 90 days to 120 days.
