Central bank eases working capital lending norms for MSEs

Taking note of cash flow difficulties faced by micro and small enterprises (MSEs) as a result of the sudden withdrawal of legal tender status of high-value currency notes, the Reserve Bank of India (RBI) on Thursday eased norms for working capital lending to such enterprises.

The central bank has allowed banks to raise working capital lending to such enterprises beyond additional working capital limits pre-determined by the banks’ boards.

A notification on RBI’s website said, “Accordingly, banks are hereby advised that they may use the facility of providing above ‘additional working capital limit’ (approved by their boards as above) to their MSE borrowers, to overcome the difficulties arising out of such cash flow mismatches also.”

The notification states that this would be a one-time measure that will remain in force up to March 31, 2017. Thereafter, lending must be normalised in the subsequent working capital assessment cycle.
As per existing guidelines, banks are expected to have in place a policy for fixing a separate additional limit at the time of sanction or renewal of working capital limits.