Debt Restructuring of SMEs-Suggested Approaches for Assessment of Credit Needs

Micro, Small and Medium Enterprises (MSMEs) are known for job creation in the country. But at the grass root level, they continue to experience inadequate credit supply which is a critical input for growth in production and sales. Consequently, the level of non-performing assets in MSME sector is high and increasing. One of the ways to assist financially ailing Small and Medium Enterprises (SMEs) is Debt Restructuring to make a project financially viable in the near future. Reserve bank of India introduced Debt Restructuring scheme for SMEs in 2005. Since this scheme is in existence for more than a decade. it calls for a review to suggest improvement it. While RBI has been making changes in debt restructuring guideless from time to time and banks have also been strengthening institutional arrangements, much needs to be done to improve the quality of assessment of credit sanctions as part of debt restructuring exercise. Appreciating this felt need, the article suggests certain new approaches.