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

Pre-Connect
•    As part of Atmanirbhar Bharat package, on 13th May, 2020, Finance Minister had announced this scheme of sub-ordinate Debt to the promoters of operational but stressed MSMEs.
•    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 was being felt that the biggest challenge for stressed MSMEs was in getting capital either in the form of debt or equity.
•    The latest classification with effect from July 1 for MSMEs are-
o    Micro enterprises-investments not exceeding Rs 1crore and turnover of Rs 5 crore,
o    Small enterprises - investment up to Rs 10 crore and turnover of up to Rs 50 crore
o    Medium enterprises- investments not exceeding Rs 50 crore and turnover of Rs 250 crore.

Analytica
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.
    Promoter(s) of MSMEs meeting the eligibility criteria may approach any scheduled commercial banks to avail benefit under the scheme.
    The scheme will be operationalised through Credit Guarantee Fund Trust for MSEs (CGTMSE).
Benefits

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MUDRA,CGS, RBI
    It is expected that this scheme would provide much required support to around 2 lakh MSMEs and will help in reviving the economic activity.
    It will also help in protecting the livelihoods and jobs of millions of people who depend on them.

Conclusion
The scheme would provide much needed relief to the MSME sector which are facing the double wrath, earlier economic slowdown and now the impact of pandemic.