Government launches another funding scheme to help the distressed MSME sector

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News: Union Minister of Micro, Small and Medium Enterprises(MSMEs) has launched Credit Guarantee Scheme for Subordinated Debt(CGSSD) which is also called “Distressed Assets Fund–Sub-ordinate Debt for MSMEs”.

Facts:

  • Aim: To extend support to the promoters of the operational MSMEs which are stressed and have become NPA as on 30th April, 2020.
  • Guarantee: It provides a 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.
  • Features of the Scheme: 
    • 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.
  • Duration: There will be a moratorium of 7 years on payment of principal whereas maximum tenure for repayment will be 10 years.
  • Implementation: The scheme will be operationalised through Credit Guarantee Fund Trust for MSEs (CGTMSE).