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when default is for a period of 61 -90 days, the committee
should be approached by the branch with an application.
Besides the bank, any eligible MSME shall also approach the
Committee along with an application and a Liability
Statement to seek a revival package. The application is
admitted by the committee if all the relevant particulars are
submitted in affidavit.

After the receipt of the application, the committee sends a
notice to all creditors to confirm their dues. Then the
committee prepares Corrective Action Plan (CAP) exploring
one of the options namely, Rectification, Restructuring and
Recovery. The CAP also involves concessions to be granted
as a part of restructuring along with terms and conditions.
make a project financially viable in the near future provided Once the CAP is sanctioned by the creditors with super
the project is technically, commercially & managerially majority, two agreements are signed namely, Debtor -
viable and the borrower continues to be honest & Creditor agreement (DCA) and Inter Creditors Agreement.
cooperative.
Since the Framework is well drafted, it is hoped sick MSMES
For this purpose, the project deserves certain concessions will be revived soon. Wherever the above discussed do not
from banks in the form of reduction in the rate of interest, yield any better results in loan recovery, we have to go in
rephasement of unpaid loan instalments, additional finance for loan compromise which means agreeing to a borrower's
to be provided though it is non-performing asset (NPA), request of accepting a part of outstanding dues in the books
reducing promoter's contribution, financing of cash losses of the bank as full and final payment or allowing for the non-
until the project breaks even etc. Thus, certain changes are compliance of certain terms of the loan, after analyzing the
needed in the original loan agreement as part of debt alternative courses of action, genuineness and capacity of
restructuring. Debt restructuring is done as per the RBI the MSME borrower to repay.
guidelines issued in 2005. In restructuring of MSMEs,
commercial banks have been able to turn around the Each bank should have a Board approved Loan Compromise
stressed projects of MSMEs and make a good loan recovery policy. The Branch manager has to prepare a process note
from them. in the light of the compromise policy. Loan compromise
should be considered as a last resort. During the recent
For sick MSMEs rehabilitation support would help in loan past, banks have been able make sufficient recovery through
recovery. To elaborate, in March 2016, the Government in compromise. But care should be taken to ensure that this
consultation with the RBI, introduced a Framework on shall not throw a wrong signal to good/ regular borrowers.
Revival and Rehabilitation of MSMEs, which provides an
institutionalized framework for revival and rehabilitation of The last option in respect of non legal measures is available
sick MSME enterprises which are potentially viable, but they is loan write off. For write-off, various factors are considered
are under temporary difficulties. The Framework provides which include: means or capacity of the borrower and
for a well structured mechanism which could be triggered guarantor, the amount to be written off, efforts already put
either by the banker or by the entrepreneur at the first signs in for recovery and staff accountability. The write-off is an
of stress. internal exercise and the branch staff should keep the matter
confidential. Even after write-off, the recovery efforts should
Each bank has to set up a committee consisting of Regional/ continue for which banks have cash incentive scheme for
Zonal Head, Officer in - charge of Credit Dept in controlling their staff.
office, a practicing chartered accountant and a
representative of District Industry centre (DIC). As soon as If there are chances of loan recovery through legal action,
an advance becomes a Special mention Account (SMA) -2 we have first recall advances for which a recall notice should

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