SMEs in India will have more time to pay off their loan debts as the nation looks to ease small businesses’ cash crunch following demonetization.
Reports this week said the Reserve Bank of India (RBI) has extended standing special allowances for small business borrowers of outstanding loans.
“On a review, it has been decided to provide 30 days, in addition to the 60 days provided (on Nov. 21),” the bank said in its announcement. The extensions apply to loan repayments due between Nov. 1 and Dec. 31 of this year, it clarified.
Altogether, borrowers, including SMEs, will have 90 days to repay loans.
“The demonetization of higher-value currency notes has affected normal banking activities, including clearing of checks,” Livemint explained in its report. “Besides, borrowers are unable to get payments from their creditors due to various restrictions, including cash withdrawal limit of Rs24,000 per week, limiting their options to repay their dues.”
Earlier reports have pointed out the friction caused by the unexpected demonetization announced by Prime Minister Narendra Modi in an effort to curb money laundering and fraud. Since, B2B payments are just one area facing disruption; businesses often pay their suppliers in cash, but withdrawal limits and an inability to use higher-value notes has caused delay in those payments.