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The government may extend the non-performing asset (NPA) classification period for loans to micro, small and medium enterprises (MSMEs) from 90 days to 180 days in the Union Budget of FY25. Business Standard Reports

MSMEs are important job creators in India, contributing about 29 percent of the country’s gross value added and about 45 percent of its exports. However, these businesses often struggle to get their payments on time, which can lead to loan defaults.

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To address these issues, the government has mandated a 45-day payment cycle for goods and services purchased from SMEs from April 2024. However, this timeline may undergo further adjustments due to complaints from various constituencies.

Money control Could not independently confirm the development.

The senior official also told the publication that a possible relaxation for Special Mention Accounts (SMA) for MSMEs is on the cards. SMA is a rating used by banks to identify loans showing signs of stress. According to the official, SMA-0 can be extended from 30 days to 60 days, SMA-1 from 60 days to 90 days and SMA-2 from 90 days to 120 days.

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RBI data shows that in FY24, the share of outstanding bank credit to MSMEs was 28 per cent of total credit to the industry segment, with the remaining 72 per cent going to large enterprises. In 2023, the Ministry of MSMEs informed the Rajya Sabha that an expert committee estimated the overall credit gap in the sector to be between Rs 20 trillion and Rs 25 trillion.




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