Nitin Gadkari launches guarantee cover INR twenty thousand crore to MSMEs.

Micro, Small and Medium enterprises (MSME) has been hit hard by successive lockdowns. For them to overcome this situation the Union Minister Nitin Gadkari launched a Credit Guarantee Scheme for Sub-ordinate debt to provide a sum of INR twenty thousand crore to2 lakh MSMEs.

This scheme allowed the promoters of stressed MSMEs units to take debts from the banks inorder to invest in it as equity. The funding scheme is to help the sector by providing a sub-debt facility to promoters of operational MSMEs that are distressed or non-performing assets (NPAs). It is also called the Distressed Assets Fund – Sub-ordinate Debt for MSMEs’.

An official statement stated “The biggest challenge for stressed MSMEs was in getting the capital either in the form of debt or equity. Therefore as a part of Atmanirbhar Bharath packageon May 13 2020, the Finance Minister Nirmala Sitharaman had announced this scheme of sub-ordinate debt to the promoters of operational but stressed MSMEs”.

The scheme was formally launched by Nitin Gadkari in Nagpur after the completion of formalities which included the approval of the Cabinet Committee on Economic Affairs and consultation with the finance ministry, SIDBI and the Reserve Bank of India. This scheme support promoters of the operational MSMEsthat are stressed and have become non-performing assets as in April 30, 2020.

MSMEs promoters will be given a credit of 15 percent or INR 75 lakhs of their stake (equity plus debt). Inturn the promoters will infuse this amount in the MSME units as equity to enhance the liquidity and maintain debt-equity ratio.

There will be a moratorium of 7 years on payment of principal amount whereas maximum tenor for repayment will be 10 years.

Further the statement said “It is expected that this scheme would provide much required support to around two lakh MSMEs and will help in reviving the economic activity in and through thus sector. It will also help in protecting the livelihoods and jobs of millions of people who depend on them”.

MSMEs promoters meeting the eligible criteria can approach any scheduled commercial banks to avail the benefit of the scheme.