ministry-of-msme-launches-another-funding-scheme-to-help-the-distressed-sector

Context: Recently, the Minister of MSME launched the Credit Guarantee Scheme for Sub-ordinate Debt (CGSSD) which is also called “Distressed Assets Fund–Sub-ordinate Debt for MSMEs”.

More on news:

  • As per the Scheme, 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.
  • It is part of Atma Nirbhar Bharat package announced on 13th May, 2020.

The highlights of the scheme are:

  • It seeks to extend support to the promoters of the operational MSMEs which are stressed and have become NPA as on 30th April, 2020.
  • Promoters of the MSMEs will be given credit equal to 15% of their stake (equity plus debt) or Rs. 75 lakh whichever is lower.
  • Promoters 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 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 tenure for repayment will be 10 years. 
  • The scheme will be operationalised through Credit Guarantee Fund Trust for MSEs (CGTMSE).

Significance of the scheme:

  • It will provide 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. 
  • Promoters of MSMEs meeting the eligibility criteria may approach any scheduled commercial banks to avail benefit under the scheme. 

 

The Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGS):

  • It  was launched by the Government of India (GoI) to make available collateral-free credit to the micro and small enterprise sector. 
  • Both the existing and the new enterprises are eligible to be covered under the scheme. 
  • The Ministry of Micro, Small and Medium Enterprises, GoI and Small Industries Development Bank of India (SIDBI), established a Trust named Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to implement the Credit Guarantee Fund Scheme for Micro and Small Enterprises. 
  • The extent of guarantee cover is 80%

(i) Micro and Small Enterprises operated and/or owned by women; and 

(ii) all credits/loans in the NorthEast Region (NER) for credit facilities upto Rs 50 lakh. In case of default, Trust settles the claim up to 75% of the amount in default of the credit facility extended by the lending institution for credit facilities upto Rs 200 lakh.

Source: https://pib.gov.in/PressReleasePage.aspx?PRID=1633907

Image Source: thehindubusinessline.com