The Reserve Bank of India (‘RBI’) has pursuant to Circular dated January 1, 2019 on Restructuring of Advances – Micro, Small and Medium Enterprises (‘MSME Circular’), permitted a one-time restructuring of existing loans to Micro, Small and Medium Enterprises (‘MSMEs’) classified as ‘standard’ without a downgrade in the asset classification, subject to compliance with, inter alia, the following key conditions:(i)      Aggregate exposure (including non-fund based facilities) of banks and non-banking financial companies (‘NBFCs’) to the borrower must not exceed INR 250 million as on January 1, 2019;(ii)     The borrower’s account is in default, but is classified as a ‘standard asset’ as on January 1, 2019 and continues to remain so till the date of the implementation of the restructuring (‘Implementation Date’);(iii)    Other than where exemption has been granted, the borrowing entity has obtained its GST (Goods and Services Tax) registration as of the Implementation Date; and(iv)     The restructuring is implemented by March 31, 2020.An additional provision of 5% is to be made in respect of restructured accounts. Post restructuring, non-performing asset (‘NPA’) classification of these accounts will be as per the extant income recognition and asset classification (‘IRAC’) norms. Banks and NBFCs are required to make appropriate disclosures relating to such restructured MSME accounts. Barring the exception set out in the MSME Circular, restructured MSME accounts must be downgraded to NPA upon restructuring and fall into progressively lower asset classification and trigger higher provisioning requirements as per the extant IRAC norms. Such an account may be considered for upgradation to ‘standard’ only if it demonstrates satisfactory performance during the ‘specified period’ as set out in the MSME Circular.The MSME Circular also permits NPA accounts to be restructured, provided that the extant asset classification norms governing restructuring of NPAs will continue to be applicable.