RBI asks banks to reclassify MSMEs as per revised criteria

"We advise you to initiate necessary action for reclassification of enterprises as per the new definition w.e.f July 1, 2020 and issue necessary instructions to your branches/controlling offices in this regard, at the earliest, RBI said in a communication to banks, financial institutions and non-banking financial companies (NBFCs).

Mumbai:The RBI has asked banks, financial institutions and NBFCs to reclassify micro, small and medium enterprises on the basis of the new criteria.

Last month, the government notified new criteria for classification of micro, small and medium enterprises (MSMEs) on the basis of turnover and investment in plant and machinery.

"We advise you to initiate necessary action for reclassification of enterprises as per the new definition w.e.f July 1, 2020 and issue necessary instructions to your branches/controlling offices in this regard, at the earliest, RBI said in a communication to banks, financial institutions and non banking financial companies (NBFCs).

After 14 years since the MSME Development Act came into existence in 2006, a revision in MSME definition was announced in the Atmanirbhar Bharat package on May 13.

The Reserve Bank further said in case of an upward change in terms of investment in plant and machinery or equipment or turnover or both, and consequent re-classification, an enterprise will maintain its prevailing status till expiry of one year from the close of the year of registration.

As per the revised definition, an enterprise is micro where the investment in plant and machinery or equipment does not exceed Rs 1 crore and turnover does not cross Rs 5 crore.

An enterprise is now classified as small enterprise, where the investment in plant and machinery or equipment does not exceed Rs 10 crore and turnover is not over Rs 50 crore.

For medium enterprise, as per the new classification, the investment in plant and machinery or equipment should not exceed Rs 50 crore and turnover should be below Rs 250 crore.

Bank credit grows 6.18%, deposits 11%: RBI data

Bank credit and deposits grew 6.18 per cent and 11 per cent to Rs 102.45 lakh crore and Rs 138.67 lakh crore, respectively, in the fortnight ended June 19, according to the RBI.

In the fortnight ended June 21, 2019, bank credit had stood at Rs 96.48 lakh crore and deposits at Rs 124.92 lakh crore.

In the previous fortnight that ended on June 5 this year, advances had grown 6.24 per cent and deposits by 11.28 per cent.

Rating agency Crisil in a recent report said bank credit growth is likely to nosedive to a multi-decadal low of 0-1 per cent in 2020-21 as economic activity is sharply impacted by the COVID-19 pandemic.

For May, the non-food credit growth decelerated to 6.8 per cent year-on-year from 11.4 per cent in the corresponding period of the previous year, RBI data had shown.

The outstanding incremental non-food credit stood at Rs 90.3 lakh crore as of May 22, 2020, against Rs 84.51 lakh crore on May 24, 2019.

Bank loan growth to industry decelerated to 1.7 per cent in May from 6.4 per cent in the corresponding month last year.

Loan growth to the services sector slowed down to 11.2 per cent in May, compared with 14.8 per cent a year ago.

Personal loans growth decelerated to 10.6 per cent in May 2020, against 16.9 per cent in May 2019, RBI data showed.

(PTI Report)