NEW DELHI: With a view to improve monetary policy transmission, banks have been advised by the RBI to link loans to MSMEs to an external benchmark, the government has informed Parliament.

The reset clause for loans has been reduced to three months under the external benchmark system.

Further, to make the benefit of external benchmark-based interest regime available to existing borrowers, banks have been advised to provide a switch over option as per mutually agreed terms.

Moreover, the government implements Quality Control Orders (QCOs) with exemptions and relaxations for MSMEs to ensure no disruption of domestic production, Minister of State for Micro, Small and Medium Enterprises Shobha Karandlaje in a written reply in the Lok Sabha.

The Centre, through Bureau of Indian Standards, Department of Consumer Affairs, implements, phase-wise, QCOs issued by line ministries with exemptions/relaxations for MSMEs, to ensure that such orders do not disrupt domestic production.

Some of the key relaxations and exemptions include additional time for micro and small enterprises six-month extension for micro enterprises and three-month extension for small enterprises.