The micro, small and medium businesses, which are saddled with Rs.80,000-crore stressed loans, may get a big respite from the relaxed norms for non-performing asset categorisation.

"After the revised norms for NPA categorisation approved by the Reserve Bank of India, MSMEs will be allowed to make payments due between September 1, 2017, and January 31, 2018 within 180 days instead of the earlier 90 days," said Minister of State (Independent Charge) for Micro, Small and Medium Enterprises, Giriraj Singh.

Hoping to give a boost to the sector and also encourage job creation that has been impacted by the Goods and Services tax, the Union Cabinet had on Wednesday approved changes in the basis of classifying MSME enterprises from ’investment in plant and machinery/equipment’ to ’annual turnover’ and had allowed them to repay loans within 180 days.

There are around Rs.80,000 crore worth stressed loans in the Micro Small and Medium sector, according to Secretary, Ministry of Micro, Small and Medium Enterprises, Arun Kumar Panda.

"The payments will be allowed by banks and non-banking financial companies under the relaxed timeline without a downgrade in asset classification. This was a long standing demand of the sector," he added.

An official statement said, "This will encourage ease of doing business, make the norms of classification growth-oriented and align them to the new tax regime."

The section 7 of the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 will be amended to define units producing goods and rendering services in terms of annual turnover, the statement added.

After the decision, a micro enterprise will be defined as a unit where the annual turnover does not exceed Rs.5 crore, a small enterprise will be defined as a unit where the annual turnover is more than Rs.5 crore but does not exceed Rs.75 crore. A medium enterprise will now be a unit where the annual turnover is more than Rs.75 crore but does not exceed Rs.250 crore.

Industry also welcomed the move and said it would improve the business environment. "The definition, while facilitating ease of doing business will also encourage scale, skill, sophistication and speed in the sector. Further, the new turnover based criterion while aligning itself with the GST regime would prove to be a good tool to assess the contribution of MSMEs to GDP," said Chandrajit Banerjee, Director-General, Confederation of Indian Industry.