Yet another funding scheme to help the distressed MSME sector

The Scheme will provide Rs. 20,000 crore of guarantee cover to two lakh MSMEs.

This is a sub-debt facility to the promoters of those operational MSMEs which are distressed or NPA

– globalbihari bureau

New Delhi: Government on Wednesday launched the Credit Guarantee Scheme for Sub-ordinate Debt (CGSSD), also called “Distressed Assets Fund–Sub-ordinate Debt for MSMEs”, to provide guarantee cover worth Rs. 20,000 crores  to the promoters who can take debt from the banks to further invest in their stressed MSMEs as equity.

It may be mentioned that as part of Atmanirbhar Bharat package, on May 13 this year, Finance Minister Nirmala Sitharaman had announced this scheme of sub-ordinate debt to the promoters of operational but stressed MSMEs. The scheme was formally launched on Wednesday after completion of necessary formalities including approval of Cabinet Committee on Economic Affairs and consultation with Finance Ministry, SIDBI and RBI among others, by Minister of MSME, Nitin Gadkari from Nagpur.

Following are the highlights of the scheme:

  • This scheme seeks to extend support to the promoter(s) of the operational MSMEs which are stressed and have become NPA as on 30th April, 2020;
  • Promoter(s) of the MSMEs will be given credit equal to 15% of their stake (equity plus debt) or Rs. 75 lakh whichever is lower;
  • Promoter(s) in turn will infuse this amount in the MSME unit as equity and thereby enhance the liquidity and maintain debt-equity ratio;
  • 90% guarantee coverage for this sub-debt will be given under the Scheme and 10% would come from the concerned promoters;
  • There will be a moratorium of 7 years on payment of principal whereas maximum tenor for repayment will be 10 years.

It is expected that this scheme would provide much required support to around 2 lakh MSMEs and will help in reviving the economic activity in and through this sector. It will also help in protecting the livelihoods and jobs of millions of people who depend on them. Promoter(s) of MSMEs meeting the eligibility criteria may approach any scheduled commercial banks to avail benefit under the scheme. The scheme will be operationalised through Credit Guarantee Fund Trust for MSEs (CGTMSE). Necessary guidelines alongwith answers to possible FAQs have also been issued and made public in this regard, the MSME ministry stated.

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