AtmaNirbhar Bharat-New Loan Scheme for Distressed MSME
In India Business enterprises are going
through a broad range of interconnected issues that span from keeping their
employees and customer safe, shoring-up cash and liquidity, reorienting
operations and navigating complicated government support programs in view of
the prolonged lockdown across economy.
To overcome this situation Reserve
Bank of India, Government and other regulatory bodies among others have
announced various dedicated schemes, regulatory packages & relief measures
for business units affected by COVID-19 pandemic.
Government through Aatmanirbhar
Bharat Abhiyan has announced a slew of measures for MSME units to support
during COVID crisis. As part of relief measures, Government of India, through
Ministry of Micro, Small & Medium Enterprises, has introduced the Credit
Guarantee Scheme for Subordinate Debt (CGSSD). This scheme is operationalized
through Credit Guarantee Fund Trust for MSEs (CGTMSE).
As per the scheme, the guarantee
cover will be provided to the promoters availing debt from the banks to further
invest in stressed MSMEs as equity/ sub-debt.
The highlights of the scheme are as under:
All operational & viable MSME borrowal accounts which are stressed viz SMA-2, and have turned NPA as on 30th April 2020 are eligible for restructuring as per RBI guidelines.
What is the Credit Guarantee Scheme for Subordinate Debt?
As a special dispensation, Reserve Bank of India has permitted to reckon the funds infused by the Promoters in their MSME units through loans availed under this scheme as equity/ quasi equity from the promoters for debt-equity computation.
What is the purpose of the Credit Guarantee Scheme for Subordinate Debt?
To provide guarantee coverage for the Credit Guarantee Scheme for Subordinate Debt to provide Sub-Debt support in respect of restructuring of MSMEs. 90% guarantee coverage would come from scheme/ Trust and remaining 10% from the concerned promoter(s). The objective of the scheme is to provide personal loan through Bank to the promoters of stressed MSMEs for infusion as equity / quasi equity in the business eligible for restructuring, as per RBI guidelines for restructuring of stressed MSME advances.
What is eligibility for availing Credit Guarantee Scheme for Subordinate Debt?
The Scheme is applicable for those
MSMEs whose accounts have been standard as on 31.03.2018 and have been in
regular operations, either as standard accounts, or as NPA accounts during
financial year 2018-19 and financial year 2019-20.
For availing the sub-debt, the unit
must be in running condition and operational). Fraud/ Willful defaulter
accounts will not be considered under the proposed scheme.
Personal loan will be provided to the promoters of the MSME units. The MSME itself may be Proprietorship, Partnership, Private Limited Company or registered company etc. In case of partnership, private limited company etc, only one personal loan account shall be opened in the name of promoters, subject to maximum quantum of Rs 75.00 lakh for MSME beneficiary unit.
The Scheme is valid for MSME units which are stressed, viz. SMA-2 and NPA accounts as on 30.04.2020 that are eligible for restructuring as per RBI guidelines on the books of the Bank.
What is the quantum of the loan amount under the Credit Guarantee Scheme for Subordinate Debts?
The
guarantee coverage will be provided to the eligible MSME borrower for the
credit facilities extended under this scheme. Under this arrangement,
promoter(s) of the MSME unit will be given credit equal to 15 % of his/her
stake (equity plus debt) or Rs 75 lakh whichever is lower.
What are the Term and condition for availing Credit Guarantee Scheme for Subordinate Debts?
The
financial assistance provided as part of the scheme is to be operated as a separate
loan account and the promoter need to infuse the sub-debt / loan amount as
promoter’s contribution in the form of equity (including sub-debt or quasi
equity) into MSME entity.
Any guarantee approved under this scheme shall be over and above the existing loan / guarantee sanctioned by the trust (over and above the eligible limit of Rs.200 lakh under CGTMSE).
In case a borrower has existing limits with more than one lender, the CGSSD can be availed by the borrower through one lender only.
What is Non Performing Assets?
“Non-Performing
Assets” means an asset classified as a nonperforming based on the instructions
and guidelines issued by the Reserve Bank of India from time to time.
What is the meaning of Primary Security for a credit facility?
“Primary
Security” in respect of a credit facility shall mean the assets created out of
the credit facility so extended and/or existing unencumbered assets which are
directly associated with the projected business for which the credit facility
has been / was been extended.
What is interest Rate?
“Interest
Rate” for a lending institution means the rate so declared by that lending
institution from time to time as per Reserve Bank of India guidelines based on
which interest rate applicable for the loan will be determined.
What is the tenure of Guarantee Cover for the CGSSD?
“Tenure
of Guarantee Cover” means the maximum period of guarantee cover from the
guarantee availment date by the lending institution, which shall run through
the agreed tenure of the Sub debt facility between borrower and lending
institution basis the assessment of debt serviceability or for a maximum period
of 10 years whichever is earlier.
What is the meaning of Collateral Security?
"Collateral
security" means the security provided in addition to the primary security,
in connection with the credit facility extended by a lending institution to a
borrower.
What is the meaning of existing stake in business enterprises?
“Existing
stake” means the total contribution of the Promoter in the form of equity as
well as debt.
What is Senior Debt?
“Senior
Debt” means main debt already availed by the MSME that takes priority over
other debt / unsecured debt owed by the issuer. The seniority status of any
debt raised subsequent to implementation of the scheme will be governed by the
guidelines issued by Reserve Bank of India from time to time.
What is subordinate Debt?
“Subordinate
Debt” means credit facility extended to the Promoter(s) of the Stressed Units
for infusion in the units as Equity including Quasi Equity/Sub-Debt.
What is the meaning of Stressed MSME unit for CGSSD?
“Stressed
MSME Unit‟‟ means MSME Units which are stressed, viz. SMA-2 and NPA accounts as
on 30.04.2020 as per the guidelines issued by the Reserve Bank of India from
time to time.
What is CGTMSE (Credit Guarantee Fund Trust for Micro and Small Enterprises?
Tthe
Credit Guarantee Fund Trust for Micro and Small Enterprises set up by
Government of India and SIDBI with the purpose of guaranteeing credit facility
(ies), extended by the Member Lending Institution to the eligible borrowers.
What is Distressed Assets Fund for Credit Guarantee Scheme for Subordinate Debts( CGSSD)?
“Distressed
Assets Fund” means a fund of Rs 4000 crore created by Government of India for
providing guarantee coverage to the loans given/ credit extended to the promoters
of the eligible MSME units under the scheme.
What is the meaning of Amount in default?
“Amount
in Default” means the principal and interest amount outstanding in the
account(s) of the borrower in respect of Sub-debt facility as on the date of
the account becoming NPA, or the date of lodgment of claim application
whichever is lower for preferring any claim against the guarantee cover subject
to a maximum of amount guaranteed.
What is Credit facility refers the scheme of CGSSD?
“Credit facility”
means financial assistance provided under the scheme by way of sub-debt
facility extended by the lending institution to the Promoters of the MSME units
up to 15% of
Promoter’s
stake or Rs. 75 lakh whichever is lower.
This
personal loan shall not exceed the original debt of the beneficiary. Further, the
Equity shall be calculated on the basis of the last available audited balance
sheet of a Financial Year.
What is meaning of eligible borrower for Credit Guarantee Scheme for Sub ordinate Debts?
“Eligible
borrower” means the promoters of MSME units which are stressed, viz. SMA-2, and
NPA accounts as on 30.04.2020 and can become commercially viable as per the
assessment of the lending institutions. The Scheme is applicable for those
MSMEs whose accounts have been standard as on 31.03.2018 and have been in regular
operations, either as standard accounts, or as NPA accounts during financial
year 2018-19 and financial year 2019-20. However, fraud accounts and willful
defaulters will not be considered under the proposed scheme.
What is the Guarantee Cover available in CGSSD?
“Guarantee
Cover‟ means maximum cover available per eligible borrower of the amount in
default in respect of the credit facility extended by the lending institution.
For this scheme, 90% guarantee coverage would come from scheme/ Trust and
remaining 10% from the concerned promoter(s).
Which are the lending institutions?
“Lending institution(s)” or “Member Lending
institution(s)(MLIs)”means all Scheduled Commercial Bank for the time being included
in the second Schedule to the Reserve Bank of India Act,1934, or any other
institution(s) as may be directed by the Govt. of India from time to time.
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