Credit Guarantee Scheme for Subordinate Debt CGSSD

Credit Guarantee Scheme for Subordinate Debt CGSSD

Purpose To provide guarantee coverage under CGSSD scheme by way of 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 banks to the
promoters of stressed MSMEs for infusion as equity / quasi equity/ sub debt in the business eligible for
restructuring, as per RBI guidelines for restructuring of stressed MSME advances.

Maximum period of 10 years from the guarantee availment date or March 31, 2021 whichever is earlier,
or till an amount of Rs 20,000 crore of guarantee amount is approved.

Eligible MLIs
MLIs / Lending institutions for this purpose shall include all Scheduled Commercial Banks (SCBs).

Eligible Borrowers

  •  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.
  •  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.
  •  The Scheme is valid for MSME units which are stressed, viz. SMA-2 and NPA accounts as on 30.04.2020 and can become commercially viable as per RBI guidelines in the books of the Lending institutions.

Loan Amount

  • Promoter 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.
  •  MLIs shall carry out their own due diligence to assess the viability, need and requirement of sub-debt facility in respect of restructuring of stressed MSME units.
  • This scheme will be operated as a separate loan account.

Interest Rate
Linked to external benchmark rates as per RBI guidelines plus spread as decided by Banks.

Tenure of Repayment

  • The maximum tenor for repayment will be 10 years. There will be a moratorium of 7 years (maximum) on the payment of principal. Till the 7th year, only interest will be paid.
  •  Pre-payment of loan is permitted at no additional charge /penalty to the borrower.

The sub debt facility to sanctioned by MLIs will have 2 nd charge of the assets financed under existing
facilities for the entire tenure of the sub debt facility.

Guarantee Fee
1.50% per annum on the guaranteed amount on outstanding basis.