Scheme Overview & Objective
The Credit Guarantee Scheme for Subordinate Debt (CGSSD) is a government initiative launched by the Ministry of Micro, Small and Medium Enterprises (MSME) to support financially stressed MSMEs. Implemented through the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), CGSSD aims to revive viable but stressed MSMEs by providing subordinate debt to promoters. This debt is infused into the business as equity or quasi-equity, improving financial health and enabling restructuring under RBI guidelines.
With a 90% government guarantee and a maximum assistance of ₹75 Lakhs, CGSSD reduces lending risks for banks and enhances access to finance for eligible MSMEs. The scheme targets businesses classified as SMA-2 or NPA accounts, offering a flexible repayment tenure of up to 10 years, including a moratorium of up to 7 years.
Eligibility Criteria & Scope
To qualify for CGSSD, businesses must meet the following criteria:
- Stressed MSMEs: Classified as SMA-2 or NPA accounts, deemed commercially viable for restructuring by the lending institution.
- Existing MSME: Operational during FY 2018-19 and FY 2019-20, with a standard account as of March 31, 2018.
- Eligible Promoters: The loan is sanctioned to promoters who must infuse the amount as equity or quasi-equity.
- Commercial Viability: The lending bank must determine the MSME's potential for financial sustainability post-restructuring.
- Clean Credit History: Fraud accounts and willful defaulters are ineligible.
Key Financial & Growth Benefits
CGSSD offers several advantages for stressed MSMEs:
- Business Revival Support: Provides capital to restart operations and improve cash flow.
- Reduced Risk for Banks: 90% government guarantee encourages banks to extend financial assistance.
- Strengthens Net Worth: Infusion of subordinate debt as equity improves the balance sheet and credit profile.
- Long Repayment Tenure: Up to 10 years with a moratorium of up to 7 years on principal repayment.
- Employment & Business Continuity: Helps preserve jobs and maintain operations, contributing to economic growth.
Application Procedure & Documents
Follow these steps to apply for CGSSD:
- Prepare Required Documents:
- Udyam Registration Certificate
- Certificate of Incorporation / Business Registration
- Company PAN Card
- Promoter's Aadhaar Card & PAN Card
- KYC Documents of Promoters
- Audited Financial Statements
- Latest Bank Statements
- Existing Loan Account Details
- Proof of Promoter's Stake
- CIBIL Report (if required)
- MSME Restructuring Proposal
- Business Revival Plan / Project Report
- Approach a Lending Bank: Submit your application and documents to an eligible Scheduled Commercial Bank.
- Bank Assessment: The bank evaluates your MSME's commercial viability and restructuring potential.
- Loan Sanction: Upon approval, the bank sanctions the subordinate debt to the promoter.
- Equity Infusion: The promoter infuses the borrowed amount into the MSME as equity or quasi-equity.
- Restructuring: The MSME undergoes restructuring as per RBI guidelines.
Official FAQs
Q1: What is the maximum assistance under CGSSD?
A: Up to ₹75 Lakhs, based on the promoter's stake.
Q2: Who provides the guarantee cover?
A: The government provides a 90% guarantee through CGTMSE.
Q3: What is the repayment tenure?
A: Up to 10 years, with a moratorium of up to 7 years on principal repayment.
Q4: Can willful defaulters apply?
A: No, fraud accounts and willful defaulters are ineligible.
