Why In News?

Recently, the Minister of MSME launched the Credit Guarantee Scheme for Subordinate Debt (CGSSD) which is also called “Distressed Assets Fund–Sub-ordinate Debt for MSMEs”.

Background: 

• This scheme was announced as a part of the AtmaNirbhar Bharat Abhiyan package by the  Finance Minister.
• After consultation with the Reserve Bank of India, SIDBI, and the Ministry of Finance, the scheme was approved by the Committee on Economic Affairs to boost the MSME sector which was worst hit due to restrictions imposed due to COVID-19.

Highlights of the scheme:

• The scheme intends to support about 2 lakh MSMEs with a  guarantee cover worth Rs. 20,000 crores which will be provided to the promoters who can take debt from the banks to further invest in their stressed MSMEs as equity.
• This Scheme seeks to extend support to the promoter(s) of the operational MSMEs which are stressed and have become NPA.
• 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. 
• There will be a moratorium of 7 years on payment of principal whereas maximum tenor for repayment will be 10 years.
• The scheme will be implemented through the Credit Guarantee Fund Trust for MSEs (CGTMSE). 
• Promoter(s) of MSMEs meeting the eligibility criteria may approach any scheduled commercial banks to avail benefit under the scheme.

Intended benefits- 

• This scheme will provide the required support to around 2 lakh MSMEs and will help in reviving the economic activity in and through this sector.
• It will help in protecting the livelihoods and jobs of millions of people who depend on them.

What are Micro, Small and Medium Enterprises (MSMEs)?

MSMEs are defined by the criteria of their investment and turnover. The new definition of MSMEs are-

• A micro-enterprise, where the investment in Plant and Machinery or Equipment does not exceed one crore rupees and turnover does not exceed five crore rupees.
• A small enterprise, where the investment in Plant and Machinery or Equipment does not exceed ten crore rupees and turnover does not exceed fifty crore rupees.
• A medium enterprise, where the investment in Plant and Machinery or Equipment does not exceed fifty crore rupees and turnover does not exceed two hundred and fifty crore rupees.