Explain The Definition of Sick SMEs Units


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SME

Definiton of Sick SMEs Units: The definition of sickness in SMEs sector has been changing. The RBI has been instrumental in appointing different committees from time to time to look into issue of the sickness affecting the SMEs sector.

 Given below is the latest definition of sickness;

  1. A SME unit is considered sick, 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 one year,
  2. The requirement of overdue period exceeding one year will remain unchanged even if the present period for classification of an account as substandard is reduced in due course, or
  3. When there is an erosion in net worth due to accumulated losses to the extent of 50% of its net worth during the previous accounting year, &
  4. When the unit has been in commercial production for atleast two years.

 

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