Extension of Credit Guarantee Scheme for Subordinate Debt

Ministry of Micro, Small & Medium Enterprises has extended the credit guarantee scheme for subordinate debt (CGSSD) by one more year till March 31, 2023. The decision of extension was made on the basis of the requests received from the stakeholders of the scheme. For more details on Credit Guarantee Scheme for Stressed/NPA MSMEs, click here

Credit Guarantee Scheme for Subordinate Debt’

To provide emergency credit support to MSMEs impacted by COVID -19, the Ministry of Micro, Small and Medium Enterprises (MSMEs) has introduced the Distressed Asset Fund – Subordinated Debt for Stressed MSMEs on May 13, 2020, under the Atma Nirbhar Bharat Package. In this connection, another funding scheme of the Credit Guarantee Scheme for Subordinate Debt (CGSSD was launched on June 24, 2020, to help the distressed MSME. As part of this Scheme, the guarantee coverage will be provided to schedule commercial banks for facilitating support to stressed MSME viz. SMA-2 and NPA accounts are eligible for restructuring as per RBI guidelines on the books of the Lending institutions. The promoters who can take debt from the banks to further invest in the stressed MSMEs as equity. This sub-debt facility is provided to the promoters of those operational MSMEs which are distressed or nonperforming assets (NPA).

Distressed Asset Fund – Subordinated Debt for Stressed MSMEs

The Distressed Asset Fund – Subordinated Debt for Stressed MSMEs is a scheme of Ministry of MSME under which credit facility is provided to the Promoters of the stressed MSMEs by Scheduled Commercial Banks for infusing the same as equity, quasi-equity, sub-debt in the unit.

The Maximum sub-debt amount Eligible under the Scheme

Under the Scheme, the Promoter(s) of the MSME unit will be given a credit facility equal to 15 % of their stake in the MSME entity (equity plus debt) or Rs.75 lakh whichever is lower according to the last audited Balance Sheet.

Earlier Extension

Initially, the scheme was upto March 31, 2021, and to keep the assistance available for stressed MSME units, the government had earlier extended this scheme upto March 31, 2022. On the basis of the requests received from the stakeholders of the scheme, the Government has decided to further extend it by a period of another year beyond March 31, 2022. The scheme will now remain operational till March 31, 2022.

Duration of the Scheme

The Scheme would apply to all credit facilities sanctioned under the CGSSD scheme for a maximum period of 10 years from the guarantee availment date or 31.03.2023, whichever is earlier or till an amount of Rs 20,000 crore of guarantee amount is approved. The official Notification of the MSME regarding the extension of the Credit Guarantee Scheme for Subordinate Debt is as follows:

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