What changed
RBI withdrew the Appendix-II relief and concession norms from the January 16, 2002 circular for rehabilitating viable/potentially viable sick SSI units. This follows the shift to the Base Rate regime from July 1, 2010, making PLR/BPLR references obsolete. Banks are now required to have their own Board-approved restructuring/rehabilitation policies for sick MSE units.
What it means for you
Banks gain flexibility to design tailored rehabilitation packages for sick SME units, including below-Base Rate lending if viability and recompense clauses are in place. This replaces the rigid 2002 norms, aligning with the Base Rate regime and existing restructuring guidelines. Lenders must ensure their policies are Board-approved and comply with the Master Circular on interest rates.
What you must do
- Review and update your bank's restructuring/rehabilitation policy for sick MSE units to ensure Board approval.
- Ensure any below-Base Rate lending under rehabilitation includes recompense clauses as per the Master Circular on Interest Rates on Advances.
- Withdraw reliance on the old 2002 Appendix-II norms and communicate the change to relevant branches and credit teams.
- Align your policy with the May 4, 2009 circular on putting in place a restructuring policy for viable sick units.
Who it affects
All Scheduled Commercial Banks (excluding RRBs), Credit and restructuring teams handling SME/MSME accounts, Board of Directors approving restructuring policies
Can we still lend below Base Rate for sick SME rehabilitation?
Yes, but only as part of a Board-approved restructuring policy with recompense clauses, as per the Master Circular on Interest Rates on Advances. This is not a violation of Base Rate guidelines.
What replaces the old 2002 relief and concession norms?
Banks must now use their own Board-approved restructuring/rehabilitation policies for viable/potentially viable sick MSE units. The 2002 Appendix-II norms are withdrawn.