SMA-2 Stressed Loan Accounts Are Facing Difficulties, MSMEs Request RBI To Increase The Threshold Period

A recent meeting held by RBI discussed the possibility of extending the SMA -2 category threshold period. The Federation of MSME puts forward the difficulties with the current threshold period of 90 days and urges RBI to extend it further to 180 days. It is double the period currently works. What is this SMA account, its categories and significance? What are the further decisions from the government? Let us discuss below.

MSME Urges The RBI To Give Relaxation In Threshold Period Of SMA-2

MSME federation mentions that the threshold period for SMA-2 must extend from 90 days to 180 days. According to the MSME federations, the rules are quite strict for even minor delays. The penal activities for minor delays are impacting a lot of buyers. Firstly, the banks inquire about the incipient stress in an account. They put the account into special mention accounts also known as SMA. Any account that goes in this category can not use its existing credit lines for the payment of the dues. It makes it even more difficult to pay the dues. The accounts that come in the SMA categories face a lot of challenges instead of support.

Different types of SMA define the intensity and longevity of the dues. SMA-0 is a category that presents a delay in the SMA by less than 30 days. SMA-1 represents the delay in the principal and due amount by 31-60 days. Apart from that, SMA-2 refers to the payment due in 61-90 days. Thus, the MSMEs want to increase the period from 90 days to 180 days. The President of India SME Forum explains the cycle of the MSME and the less time they have to pay credit.

The MSME takes up to the first 40-45 days for production. However, it takes around 200 days to send it to market and get money from the product. Thus, the 90-day period seems shorter. The MSME faces a lot of challenges during different passes of its production and selling. The discussion had the Federation of MSME (FISME), and Laghu Udyog Bharti. Apart from extending the period, they also paid emphasis on reviewing the ‘Wilful Defaulter’ definition.

In conclusion, the Federation of Indian Micro Small & Medium Enterprises Industry (FISME) raises the matter of less time duration for the accounts under the SMA-2 category. MSMEs require more time to convert the product into cash. Thus, they require more time to pay the credit dues. They ask to make the rules in support. President of India SME, Vinod Kumar also relates it to blindfolding a person and making them stand outside in the rain.