The Indian government is preparing to approach the Reserve Bank of India (RBI) for regulatory relaxations to assist micro, small, and medium enterprises (MSMEs) facing financial stress due to the conflict in West Asia. The proposed measures include extending the non-performing asset (NPA) classification period from 90 days to 180 days, allowing MSMEs more time before their loans are categorized as stressed. Currently, loans are classified as special mention accounts (SMA) based on overdue days, with SMA 0 indicating 1 to 30 days overdue, and SMA 1 and SMA 2 indicating 31 to 60 days and 61 to 90 days, respectively. The MSME sector is vital to India's economy, contributing about 30.1% to the gross domestic product (GDP) and nearly 45% of merchandise exports. The government is also rolling out a ₹2.5 trillion (approximately $30 billion USD) relief package, which includes credit guarantees for MSMEs, as banks report potential stress in their MSME portfolios starting in the first quarter of FY27. Experts warn that timely government intervention is crucial to prevent temporary disruptions from causing long-term structural damage to the MSME sector.