New Credit Guarantee Scheme for MSMEs

• Ministry of Micro, Small and Medium Enterprises (MSMEs) launches 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

Shri Nitin Gadkari, MSME Minister, has launched the Credit Guarantee Scheme for Sub-ordinate Debt (CGSSD) which is also called “Distressed Assets Fund–Sub-ordinate Debt for MSMEs”.

Major Advantage of the Scheme:

The guarantee covers 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 need of this hour:

Getting Capital is the biggest challenge for stressed MSMEs.

• Finance Minister on 13th May, 2020,had announced Credit Guarantee Scheme to the promoters of operational but stressed MSMEs.
• Approval of Cabinet Committee on Economic Affairs (CCEA) is required
• Benefit is available After completion of necessary formalities including approval of CCEA and consultation with Finance Ministry, SIDBI and RBI among others.

Key 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.

Conclusion by MSME Ministry:

• This scheme would provide much required support to around 2 lakh MSMEs
• Will help in reviving the economic activity in and through this sector.
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 operationalized through Credit Guarantee Fund Trust for MSEs (CGTMSE).

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