New MSME loan restructuring norms a welcome step: BoI‘s Sharma

The Reserve Bank of India (RBI) now allows banks to restructure micro, small and medium enterprise (MSME) loans with a limit of Rs 25 crore. The new norms are a welcome step, says BP Sharma, Executive Director of Bank of India adding that the segment does need hand holding. As per new norms, plan for MSME restructuring will go to a committee comprising of bankers, government representatives and outside experts, which Sharma says is a big plus. The bank’s current MSME loan book stands at 12 percent, he adds. Discussing the stressed assets situation, Sharma says two main issues are lack of buyers and getting fair price for the asset. However, he expects certain accounts to get restructured via strategic debt restructuring (SDR) route. Below is the verbatim transcript of BP Sharma’s interview with Ekta Batra and Anuj Singhal on CNBC-TV18.Ekta: First wanted to ask you if you have looked at the Reserve Bank of India (RBI) allowing banks to restructure SME loans up to around Rs 25 crore which are under the overdue category. Can you tell us what the impact would be in terms of provisions and how much of your loan book is towards MSME right now? A: There are two things, there were guidelines of RBI and government of India Ministry of MSME on restructuring of accounts. However, the revised guidelines which I have just gone through, there are two interesting features. One is the proposal for either corrective action plan or restructuring will go to a committee which is quite large. That means apart from the banker, there will be one expert on MSME from outside besides a government representative. In case the state government doesn’t send a nomination, then a retired senior banker not below the rank of AGM will be a part of that. I think that makes a sense from the angle that restructuring and handholding of this core segment of economy needs a little bit different treatment. To that extent, the step is welcome. Ekta: What would be the impact say in terms of provisioning for Bank of India and how much of your loan book is towards MSME right now? A: MSME loan book is in double digit, it is more than 12 percent. This I am telling gross, not net. Ekta: There is a criticism from the analyst community that maybe it might be difficult to keep a tab on so many loans going forward. Is that something that you might face difficulty in when it comes to the MSME portfolio and the restructuring ability that they might have now? A: I don't think, if there are more accounts then there are more branches and this is a segment which needs handholding. In the interest of nation the bank has the spread and manpower and expertise to handle these accounts.