Following the announcement of a scheme of sub-ordinate debt for promoters of operational but stressed MSMEs under the special economic package, the MSME Ministry has launched the “Credit Guarantee Scheme for Sub-ordinate Debt” or the “Distressed Assets Fund–Sub-ordinate Debt for MSMEs.

Under this scheme a guarantee cover worth Rs. 20,000 crores will be provided to those promoters of operational but stressed MSMEs who take debt from banks to further invest in their stressed MSMEs as equity. The main features of the scheme are as under:

• Extension of support to promoter(s) of 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% will 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.

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).

To refer to the guidelines, click here and to the FAQs here.