Credit Guarantee Scheme for Sub-ordinate Debt (CGSSD)

The scheme was announced by the Finance Minister as part of the Atmanirbhar Bharat Abhiyan.

It is also called as “Distressed Assets Fund–Sub-ordinate Debt for MSMEs”.

Overview:

• It is a scheme for the distressed MSME sector.
• The scheme seeks to extend support to the promoter(s) of the operational MSMEs which are stressed and have become NPAs as on 30th April, 2020.
• As per the Scheme, 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).

Implementation:

1. 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.
2. Promoter(s) in turn will infuse this amount in the MSME unit as equity and thereby enhance the liquidity and maintain the debt-equity ratio.
3. 90% guarantee coverage for this sub-debt will be given under the Scheme and 10% would come from the concerned promoters.
4. There will be a moratorium of 7 years on payment of principal whereas the maximum tenor for repayment will be 10 years.

Significance:

The 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.