The Union Government has launched the Credit Guarantee Scheme for Subordinate Debt for MSMEs, thereby operationalising the Rs 20,000 crore distressed assets fund & recently the Ministry for MSMEs issued guidelines for the scheme which was announced under the Aatmanirbhar Bharat economic package & it will definitely provide some solace & liquidity to the stressed MSMEs said MSME expert, CA Julfesh Shah while adressing the webinar organised by MSME Entrepreneurs Forum of Western India zone.He further said that the scheme will be operationalized through a special window created for this purpose under Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)
The Scheme will be called as ‘Distressed Assets Fund – Subordinate Debt for Stressed MSMEs’. Shah further said that the objective of the scheme is to provide personal loan through banks 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.
For the purpose of this scheme 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 upto 15% of promoter’s stake or Rs. 75 lakh whichever is lower. However 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.Mr Shah elaborated that under this scheme eligible borrower will mean 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,Shah clarified.In cases where recovery proceedings are underway and banks assess that with the facilities provided under the scheme the account would be viable, the banks shall withdraw the recovery proceedings before going ahead with restructuring etc.
The tenor of sub-debt facility provided under CGSSD shall be as per the repayment schedule defined by the lender, subject to a maximum tenor of 10 years from the guarantee availment date or March 31, 2021 whichever is earlier.
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. While the interest on the sub-debt under the scheme would be required to be serviced regularly (monthly), the principal shall be repaid within a maximum of 3 years after completion of moratorium.
Pre-payment of loan is permitted at no additional charge /penalty to the borrower.Guarantee Fee of 1.50% per annum on the guaranteed amount on outstanding basis is applicable & it may be borne by the borrowers as per the arrangements between the borrower and the MLIs. The amount equivalent to the guarantee fee payable by the eligible lending institution may be recovered by it, at its discretion from the eligible borrower.
The guarantee service fee once paid by the lending institution to the Trust is non- refundable except under certain circumstances like excess remittance; remittance made more than once against the same portfolio.
The presentation was followed by question-answers session which was effectively resolved by the speaker.Convenor of the forum Mr S.N.Rishi made welcome remarks & Deputy Convenor Mr V.K.Singh coordinated the session & proposed vote of thanks.A large number of entrepreneurs from different sectors participated in the webinar.