Credit Guarantee Scheme for Sub-ordinate Debt to help the distressed MSME sector

Ministry of MSME has launched the Credit Guarantee Scheme for Sub-ordinate Debt (CGSSD) which is also called “Distressed Assets Fund–Sub-ordinate Debt for MSMEs”. 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.

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The highlights of the scheme are:

The guarantee cover worth Rs. 20,000 crores will be provided to the promoters who can take debt from the banks to further invest in their stressed MSMEs as equity.

The scheme will be operationalised through Credit Guarantee Fund Trust for MSEs (CGTMSE).

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.