Nearly one‑third of Indian MSMEs reported stressed accounts in FY 2025, yet the Credit Guarantee Scheme for Subordinate Debt (CGSSD) provides up to ₹75 Lakhs of guaranteed subordinate debt to revive them.
Scheme Overview & Objective
The Credit Guarantee Scheme for Subordinate Debt (CGSSD) is a Government of India initiative launched by the Ministry of Micro, Small and Medium Enterprises (MSME) and implemented through the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE). Its core objective is to enable financially stressed but commercially viable MSMEs to restart operations by furnishing promoters with subordinate debt that must be infused back into the business as equity or quasi‑equity. By doing so, the scheme strengthens the balance sheet, improves creditworthiness, and unlocks restructuring options under RBI guidelines.
Key statistical highlights:
| Maximum Assistance | ₹75 Lakhs (based on promoter’s stake) |
|---|---|
| Guarantee Coverage | 90% (government guarantee via CGTMSE) |
| Target Beneficiaries | Stressed MSMEs – SMA‑2 & NPA accounts |
| Repayment Tenure | Up to 10 years with moratorium up to 7 years |
Eligibility Criteria & Scope
Only MSMEs that meet all of the following conditions can access the CGSSD grant:
- Stressed MSME status: Must be classified as SMA‑2 or NPA by the lending bank and deemed commercially viable for restructuring.
- Existing operation: The enterprise should have been a standard account as of 31 March 2018 and remained operational during FY 2018‑19 and FY 2019‑20.
- Promoter eligibility: The loan is sanctioned to the promoter(s) who must subsequently inject the funds into the MSME as equity, quasi‑equity, or subordinate debt.
- Commercial viability: The lending bank must be convinced that the MSME can recover and sustain operations after the infusion.
- Clean credit record: Fraudulent accounts and willful defaulters are excluded.
These criteria ensure that the scheme targets businesses with genuine revival potential while safeguarding public funds.
Key Financial & Growth Benefits
Approved applicants receive a suite of financial advantages that directly address the pain points of stressed MSMEs:
- Substantial capital infusion: Up to 15% of the promoter's stake or ₹75 Lakhs, whichever is lower, as subordinate debt.
- Favorable repayment terms: Long tenure of up to 10 years with a moratorium of up to 7 years, easing immediate cash flow pressures.
- Credit enhancement: 90% guarantee coverage from CGTMSE, improving access to further credit facilities.
- Equity strengthening: Funds must be infused as equity or quasi-equity, directly improving the MSME's balance sheet and solvency ratios.
These benefits collectively provide a robust framework for MSMEs to recover, restructure, and resume growth trajectories.
