Context: Recently, Union Minister of Micro, Small and Medium Enterprises(MSMEs) has launched Credit Guarantee Scheme for Subordinated Debt(CGSSD) which is also called “Distressed Assets Fund–Sub-ordinate Debt for MSMEs”.
Key Points

• It is a scheme for the distressed MSME sector.
• The scheme seeks to extend support to the promoter(s) of the operational MSMEs which are stressed and have become NPAs as on 30th April, 2020.
• As per the Scheme, 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.
• The scheme will be operationalised through Credit Guarantee Fund Trust for MSEs (CGTMSE).
• Guarantee: It provides a guarantee cover worth Rs. 20,000 crores to the promoters who can take debt from the banks to further invest in their stressed MSMEs as equity.

Features of the Scheme

• 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.
• Duration: There will be a moratorium of 7 years on payment of principal whereas maximum tenure for repayment will be 10 years.