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RESERVE BANK OF INDIA (RBI)

December 4, 2012
  1. Export of Goods and Software – Realisation and Repatriation of export proceeds – Liberalisation –RBI had vide Circular No. A.P. (DIR Series) Circular No. 40 dated 1st November, 2011 enhanced the period of realization and repatriation to India of amount representing the full export value of goods or software exported, from six months to twelve months from the date of export and had specified that the relaxation would be available upto 30th September, 2012.Further, the RBI has now vide Circular No. A.P. (DIR Series) Circular No. 52 dated 20th November, 2012 decided to further extend the above referred relaxation with effect from 1st October, 2012 till 31st March, 2013.
  2. External Commercial Borrowings (ECB) Policy – ECB by Small Industries Development Bank of India (SIDBI) - RBI has vide Circular No. A.P. (DIR Series) Circular No. 48 dated 6th November, 2012 announced that SIDBI will be included as an eligible borrower for availing External Commercial Borrowings for on-lending to MSME Sector subject to the terms and conditions as mentioned below:
    1. on-lending by SIDBI shall be directly to the borrower either in Indian Rupees or in foreign currency, provided;
      1. the foreign currency risk is hedged by SIDBI in full in case of on-lending to MSME Sector in Indian Rupees
      2. on-lending in foreign currency shall be subject to Regulation 5(5) of FEMA Notification No. 3/2000-RB dated 3rd May, 2000, as amended from time to time and shall only be to those beneficiaries which have natural hedge by way of foreign exchange earnings.
    2. lithe overall limit of availment of ECB, including outstanding ECBs under automatic route shall be upto 50% of their owned funds. Further, beyond 50% will be under approval route subject to a ceiling of USD 500 million per financial year.
    3. the proceeds of ECB availed by SIDBI, shall be used for on-lending to MSME sector only for the permissible end-uses as provided under the extant ECB policy
    The other conditions of ECB shall remain unchanged.
  3. Guidelines for Rehabilitation of Sick Micro and Small Enterprises
RBI has come out with Circular No. RBI/2012‐13/273 dated 1st November, 2012 laying down the “Revised Guidelines for Rehabilitation of Sick Micro and Small Enterprises” in supersession of the earlier guidelines. The following are the important changes in the Revised Guidelines:
Sr. No Old Guidelines Revised Guidelines
1 A MSE unit is considered sick when: 
  1. If any of the borrowal accounts of the unit remains substandard for more than six months i.e. principal or interest, in respect of any of its borrowal accounts has remained overdue for a period exceeding 1 year. The requirement of overdue period exceeding one year will remain unchanged even if the present period for classification of an account as sub‐standard is reduced in due course;
  2.  
    OR
  3. There is erosion in the net worth due to accumulated cash losses to the extent of 50 per cent of its net worth during the previous accounting year;
  4.  
    AND
  5. The unit has been in commercial production for at least 2 years.
A MSE is considered ‘sick’ when – 
  1. any of the borrowal account of the enterprise remains NPA for three months or more
  2.        

     

    OR
  3. There is erosion in the net worth due to accumulated losses to the extent of 50% of its net worth.
    1.         The stipulation that the unit should have been in commercial production for at least two years has been removed.
2 No stipulated time frame for deciding the viability of a unit. The decision on viability of the unit should be taken at the earliest but not later than 3 months of becoming sick under any circumstances.
3 The procedure for declaring a unit as unviable not specified. The procedure for declaring a unit as unviable has been laid down 4 While the concept of incipient sickness was there was no definition of incipient sickness Incipient sickness or ‘handholding'.
4 While the concept of incipient sickness was there was no definition of incipient sickness. Incipient sickness or ‘handholding stage defined.
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