Government operationalizes Rs 20,000 crore stress fund for MSMEs; issues guidelines for obtaining a loan from banks
In an effort to provide emergency credit support to MSMEs affected by the coronavirus lockdown, the government has operationalized a stressed fund of Rs 20,000 crore which is expected to benefit around 2 lakhs medium and small entrepreneurs. The government has issued guidelines for the Credit Guarantee Program for Subordinated Debt (CGSSD) which is part of the 20.97 lakh crore Aatma Nirbhar Bharat Abhiyan package announced by Prime Minister Narendra Modi.
Speaking to Twitter, the Ministry of Micro, Small and Medium Enterprises (MSMEs) announced on Wednesday that the central government has launched a subordinated debt program to provide financial ease to struggling MSMEs.
“The government has given another facility to financially troubled MSMEs. The under-debt program has been launched. All preparation is complete. All PSU banks and some Pvt banks are on board. Contact your bank and be #msmetochampions. @FinMinIndia @DFS_India @CGTMSEOfficial, ”the MSME ministry said.
Govt. gave another facility for MSMEs in financial difficulty. The under-debt system has been launched. All the preparation is done. All PSU banks and some Pvt banks are on board. Contact your bank and be #msmetochampions. @EndMinIndia @DFS_India @CGTMSEOfficial
– Ministry of MSMEs (@minmsme) August 19, 2020
The objective of the program is to help MSMEs with growth potential at a time when they face a severe shortage of equity and low income. It aims to extend support to promoters of operational MSMEs who are stressed and have become NPA on April 30, 2020. The promoters of the MSME unit will receive a credit equal to 15% of the stake in the company or Rs 75 lakh, that which is the lowest.
In accordance with the latest standards, this program aims to extend support to MSMEs whose accounts were standard as of March 31, 2018 and were in regular operation, either as standard accounts or as NPA accounts during fiscal years 2018- 19 and 2019 -20. Voluntary fraudulent / defaulting accounts will not be taken into account under the proposed scheme.
The scheme is valid for troubled MSME units which were SMA-2 and NPA as of April 30, 2020, which were eligible for restructuring in accordance with RBI guidelines on the books of credit institutions. Apex Bank has called on banks to recognize emerging strains in loan accounts, classifying these assets as Special Mention Accounts (SMAs), before it becomes an NPA. SMA has been classified into SMA-0, SMA-1 and SMA-2 accounts based on the period of delay. SMA-0 are accounts on which loan repayments are in whole or in part overdue for a period of up to 30 days, SMA-1 for a period of between 31 and 60 days, and SMA-2 for 61- 90 days.
The Reserve Bank of India, at its second bimonthly monetary meeting held on August 6, also announced the extension of the MSME loan restructuring provision for borrowers with a loan of up to Rs 25 crore. as of March 1, 2020.
By Chitranjan Kumar