MSMEs NPA Classification Period Set To Double In FY25 Budget: Report

As finance minister Nirmala Sitharaman gears up to present the first full budget of NDA 3.0, the micro, small, and medium enterprises (MSMEs) may get relief in terms of loan repayment defaulting issues. 

According to a media report, the union government is looking to extend the non-performing assets (NPA) classification period for loans to MSMEs. The revised structure is expected to see the classification period go up from 90 days to 180 days. 

MSMEs contribute around 29 per cent to the nation’s gross value added (GVA). Along with this, it also has a major contribution of roughly 45 per cent to exports. However, the problem with these small, micro, and medium level enterprises is that they find it difficult to receive payment on time, which then results in their inability to repay the loans and end up being a loan repayment defaulter.

As a relief to MSMEs, the centre has mandated a 45-day payment cycle for the purchases made with SMEs since April 2024. In addition to this, there is also a possibility of potential relaxations being announced for special mention accounts (SMA) for MSMEs, according to a senior official who interacted with the media house.

To identify the loans that are showing a certain level of stress, banks use a classification known as SMA. The SMA-O might get an upgrade from 30 days to 60 days, while SMA-1 is expected to be increased from 60 days to 90 days along with SMA-2 getting increased from 90-120 days.