Govt extends Rs 20,000-cr Subordinate Debt scheme for MSMEs till March 2023 | The Financial Express

Clipped from: https://www.financialexpress.com/industry/sme/msme-fin-govt-extends-rs-20000-cr-subordinate-debt-scheme-for-msmes-till-march-2023/2460596/

Credit and Finance for MSMEs: The scheme provides credit facility via banks to the promoters of stressed MSMEs including special mention accounts (SMA)-2 and non-perform asset (NPA) accounts that are eligible for restructuring.

msme credit schemesSMAs indicate incipient stress in the business that can result in defaults in debt servicing by the promoter. (Image: pexels)

Credit and Finance for MSMEs: The MSME Ministry Monday announced the extension of the Rs 20,000-crore Credit Guarantee Scheme for Subordinate Debt (CGSSD) by another year. Launched in June 2020, the scheme was initially valid till March 31, 2021, but was later extended till March 31, 2022, in order to “keep the avenues of assistance to stressed MSME units open,” the ministry said in a statement. The latest extension was “on the basis of the requests received from the stakeholders of the scheme,” the ministry added.

The scheme provides credit facility via banks to the promoters of stressed MSMEs including special mention accounts (SMA)-2 and non-perform asset (NPA) accounts that are eligible for restructuring as per the Reserve Bank of India (RBI) guidelines on the books of the Lending institutions. 

SMAs indicate incipient stress in the business that can result in defaults in debt servicing by the promoter. While SMA-0 are accounts with payments partially or wholly overdue for 1-30 days, SMA-1 and SMA-2 accounts have payments overdue for 31-60 days and 61-90 days respectively. On the other hand, subordinate debt is referred to subordinated debenture or junior securities, a kind of unsecured loan or bond that ranks below other senior loans or securities in terms of claims on assets or earnings. 

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Importantly, the proposal for modification in the scheme guidelines is also underway, the ministry had noted in its 2021-22 annual report. This is probably because the scheme hasn’t seen much traction among eligible MSMEs as guarantees amounting to Rs 81.78 crore only to 756 borrowers were extended as of December 31, 2021, according to the report. 

For the guarantee coverage of loans, the government had contributed Rs 4,000 to set up a Distressed Assets Fund, of which only Rs 157.41 crore was released to the Credit Guarantee Trust for Micro and Small Enterprise (CGTMSE) in March 2021 that operates the scheme, according to the annual report. Overall, the government had targeted to guarantee loans to the tune of Rs 20,000 crore.

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