Restructuring / Rehabilitation Policy

  • Preamble


    The MSME restructuring/rehabilitation policy of the Bank aims at a timely and transparent mechanism for restructuring the debts of potentially viable Micro, Small and Medium (MSME) entities facing problems and to maintain the economic value of assets. In particular, the framework would aim at preserving viable MSMEs that are affected by certain internal and external factors and minimize the losses to the creditors and other stakeholders through an orderly and coordinated restructuring/rehabilitation programme.


    Restructuring process would involve modification of terms of the advance/securities, which would generally include among others, alteration of repayment period/repayable amount/rate of interest (due to reasons other than competitive reasons) etc.


    Rehabilitation would involve process to ensure that the Sick MSME Units become Viable. A unit would be considered as Sick, if


    Any of the borrowal account of the enterprise remains NPA for three months or more



    There is erosion in the net worth due to accumulated losses to the extent of 50 per cent of its net worth during the previous accounting year

  • Scope


    The policy would be applicable to the following entities that are either viable or potentially viable:


    All non-corporate Micro, Small and Medium Enterprises (MSMEs), irrespective of the level of dues to bank.


    All corporate MSMEs, which are enjoying banking facilities from a single bank, irrespective of the level of dues to the bank.


    All corporate MSMEs, which have funded and non-funded outstanding up to Rs.10 crore under multiple/ consortium banking arrangement.


    All corporate MSMEs which have funded and non-funded outstanding above Rs. 10 crores under multiple/ consortium banking arrangement would be restructured as per CDR Mechanism.In respect of BIFR cases, approval from BIFR will be obtained before implementing the restructuring/rehabilitation package.


    Accounts not eligible for Restructuring/Rehabilitation


    Accounts involving wilful default/ mismanagement, fraud and malfeasance, unauthorized diversion of funds, dispute among partners/promoters etc.


    Accounts classified by the Bank as “Loss Assets”

  • General Principles for Restructuring of Advance


    Restructuring would be applicable for the accounts classified under 'standard', 'sub-standard' and 'doubtful' categories.


    The Bank would generally not reschedule / restructure / renegotiate the borrowal accounts with retrospective effect. Funding of unrecovered interest will not be considered as retrospective restructuring.


    While a restructuring proposal is under consideration, the asset classification norms as per the extant RBI guidelines would continue to apply.


    Restructuring would be carried out with the formal consent or on the basis of request submitted by the Borrower.


    Restructuring of advances can be permitted at the following stages:


    Before commencement of commercial production/operation;


    After commencement of commercial production/operation but before the asset has been classified as ‘sub-standard’;


    After commencement of commercial production/operation and the asset has been classified as ‘sub-standard’ or ‘doubtful’


    Restructuring would be taken up only when the financial viability of the unit is established and there is a reasonable certainty of repayment from the borrower, as per the terms of the restructuring package.

  • General Principles for Rehabilitation of sick MSEs


    The rehabilitation process would start when early sign of sickness are detected. This stage will be termed as Handholding Stage.


    An account would be treated to have reached the ‘handholding stage’; if any of the following events are triggered:


    There is delay in commencement of commercial production by more than six months for reasons beyond the control of the promoters;


    The company incurs losses for two years or cash loss for one year, beyond the accepted timeframe;


    The capacity utilization is less than 50% of the projected level in terms of quantity or the sales are less than 50% of the projected level in terms of value during a year.


    The Bank would undertake timely remedial action which includes an enquiry into the operations of the unit and proper scrutiny of accounts, providing guidance/counseling services, timely financial assistance as per established need and also helping the unit in sorting out difficulties which are non-financial in nature or requiring assistance from other agencies. The remedial action/measures will be undertaken within a maximum period of two months of identification of such units.


    The MSE units which could not be revived after intervention by banks at the ‘handholding stage’ will be classified as sick subject to complying with any one of the two conditions as laid down in Para 1.3 above and based on a viability study, the viable/potentially viable units will be provided rehabilitation package.


    The decision on viability of the unit will be taken at the earliest but normally not later than 3 months of becoming sick/receipt of application for restructuring.


    A unit will be declared unviable only after the viability of the unit is ascertained by a suitable viability study. However, for micro (manufacturing) enterprises, having investment in plant and machinery up to Rs.5 lakh and micro (service) enterprises having investment in equipment up to Rs.2 lakh, the Branch Manager will take a decision on viability and record the same, along with the justification.


    If a unit is declared unviable, an opportunity will be given to the unit to present its case before the Bank’s competent authority within one month from receiving Bank’s communication to this effect.


    A decision on the unit’s representation as above will normally be taken within two months.

  • Time frame for implementation of Restructuring/Rehabilitation Proposal

    The Restructuring package will be implemented within 90 days from the date of receipt of request for restructuring from the borrower, while the rehabilitation package will be fully implemented within six months from the date of unit being declared as viable/potentially viable. During the six month period of identifying and implementing rehabilitation package, the Bank would permit "Holding Operation" which will allow the sick unit to draw funds from the cash credit account atleast to the extent of deposit of sale proceeds.

  • Asset Classification after Restructuring

    Income recognition, asset classification and provisioning in respect of restructured accounts shall be in line with applicable RBI guidelines issued from time to time.

  • Reliefs and Concessions

    The reliefs and concessions that may be extended under the restructuring / rehabilitation package will depend upon the viability of the individual account and might vary from case to case.

  • Restructuring Fee:

    As per the Bank’s norms.

  • Approach to Rehabilitation / Restructuring

    The Bank would consider the restructuring/rehabilitation package depending on the viability of the unit and would, interalia, have the following rights:

    (i) Right to seek induction of strategic investors / co-promoters

    (ii) Right to appoint special concurrent auditor

    (iii) Change of statutory auditors

    (iv) Right to appoint Lenders’ Engineer / Monitoring Agency

    (v) Right to accelerate repayment / revoke package

    (vi) Right of recompense

    (vii) Right to appoint nominee directors

    (viii) Right of conversion of Bank's dues into equity in case of default

    (ix) Right to obtain additional security including pledge of shares of the promoters, personal guarantees etc.