What is the Credit Guarantee Scheme for Subordinate Debt of MSMEs introduced by the Ministry of MSME? How can I benefit from it?

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Udyam Registration

• https//www.udyam-registration.co.in/

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What is the Credit Guarantee Scheme for
Subordinate Debt of MSMEs introduced by the
Ministry of MSME? How can I benefit from it?
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(No Transcript)
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The Ministry of MSME has introduced the Credit
Guarantee Scheme for Subordinate Debt for
stressed MSMEs (hereafter called as 'the scheme')
on 24th June 2020 with a view to support MSMEs
who have been stressed with the current difficult
times. The scheme has been introduced with a sole
objective of facilitating loans through Banks to
the promoters of stressed MSMEs in order to help
them infuse more equity/capital into their
business. Such businesses must be eligible for
restructuring under the RBI guidelines in order
to be able to avail these benefits. The ministry
has laid down some pre-requisites as well as
guidelines as to how any MSME can avail the
benefits under this scheme. Let's break them into
the below FAQs
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• How can an MSME become eligible for this scheme?
  Which MSMEs are eligible to avail benefits under
  this scheme?
• An MSME who is declared stressed after required
  evaluation from the lending institution and the
  MSME who is eligible for restructuring as per the
  RBI guidelines are eligible to avail benefits
  under this scheme.
• MSMEs need to make sure that their accounts have
  been standard as of 31st March 2018 and they have
  been operational throughout the financial years
  of 2018-19 2019-20 only are eligible under this
  scheme.
• The MSMEs should be declared stressed under SMA2
  NPA accounts as of 30th April 2020.
• MSMEs whose accounts are declared as willful
  defaulters or fraud are not eligible to avail
  benefits under this scheme.
• MSMEs who have obtained their Udyam
  Registration are only allowed to avail benefits
  under this scheme.
• Till 31st March 2022, MSMEs who have their Udyog
  Aadhar or Udyog Aadhar Memorandum are also
  eligible to avail these services.

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• How much loan can be availed by any MSME under
  this scheme? What are the guidelines for loan
  amount eligibility?
• Under this scheme the loan amount is capped at
  15 of the total equity of the promoter in his
  MSME or Rs. 75 lakhs whichever is lower as per
  their last audited balance sheet.For example If
  a promoter has invested Rs. 1 Crore as equity or
  debt in his MSME then the loan eligibility amount
  will be 15 of 1 crore i.e. Rs. 15 lakhs.
• It can be noted that not only equity but debt is
  also considered into total investment by any
  promoter in their MSME.
• Further, it needs to be noted that out of this
  eligible amount of sub-debt only 90 is
  guaranteed under this scheme. To be able to avail
  this sub-debt finance the promoter needs to bring
  in 10 themselves as restructuring finance.

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What is the tenure of loan under this scheme? For
how long will this scheme be in effect? The
tenure of loan is 10 years from date of availing
the loan or 31st March 2021, whichever is
earlier. The ministry plans to have this scheme
into effect until a total amount of Rs. 20,000
Crore is approved as guarantee. What about the
interest rate? Will it be capped? The interest
rate at which the restructuring finance is
provided will be capped. The interest rate will
be decided as per RBI guidelines by the
participating Scheduled Commercial Bank at the
time of disbursement.
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What if the unit whose accounts were declared NPA
has now closed down operations? Is it still
eligible to obtain the benefits under this
scheme? Sadly, the answer is NO. The main
requirement under this scheme is that the MSME
needs to be operational and running at the time
of application. It needs to prove it the promoter
has vested interest in the MSME and has tried his
best to keep the MSME running in difficult
conditions. Which financial institutions are
allowed to provide the benefits under this
scheme? Can a NBFC also provide loans under this
scheme? Currently only Scheduled Commercial
Banks are provided access to disbursing benefits
under this scheme. No other financial institution
can avail the guarantee under this scheme.