By

CA Amit Bansal
Keeping in view the hardship faced by MSMEs during COVID 19 pandemic crisis, the
government has announced several measures intended to provide the necessary support
to deal with the current economic crisis such as:

 Rs 3 lakh crore Collateral-free Automatic Loans (ECLGS)

 Rs 20,000 crore Subordinate Debt for Stressed MSMEs
 Rs 50,000 crore Equity infusion for MSMEs through Fund of Funds
 Global tenders to be disallowed up to Rs 200 crore
 Revised definition of MSMEs
 All receivables of MSMEs will be cleared by Government and PSU in 45 days
 Champion Portal has been launched
The Emergency Credit Line Guarantee Scheme provides 100% guarantee
coverage by NCGTC to MLIs on GECL of up to Rs. 3 lakh crore to eligible
MSMEs. MSMEs for the purpose of this Scheme will include MSMEs/ Business
Enterprises which are constituted as Proprietorships, Partnerships, Registered
Companies, Trusts and Limited Liability Partnerships (LLPs), interested borrowers
under PMMY, and also loans to individuals for business purpose.
The Scheme would be applicable to all loans sanctioned under GECL during the
period from the date of issue of these guidelines by NCGTC to 31.10.2020, or till
an amount of Rs 3,00,000 crore is sanctioned under the GECL, whichever is
earlier.
All MSME borrower accounts with combined outstanding loans across all MLIs of up to Rs. 50
crore as on 29.2.2020, and annual turnover of up to Rs. 250 crore in FY 2019-20. In case accounts
for FY 2019-20 are yet to be audited/finalized, the MLI may rely upon the borrower’s declaration of
turnover

The Scheme is valid only for existing customers on the books of the MLI.

Borrower accounts should be classified as regular, SMA-0 or SMA-1 as on 29.2.2020. Accounts

classified as NPA or SMA-2 as on 29.2.2020 will not be eligible under the Scheme.

The MSME borrower must be GST registered in all cases where such registration is mandatory.
This condition will not apply to MSMEs that are not required to obtain GST registration.
A separate loan account should be opened for the borrower, distinct from the
existing loan account(s), for coverage under the Scheme.

The tenor of loans provided under GECL shall be for a tenor of four years from
the date of disbursement. No pre-payment penalty shall, however, be charged by
the MLIs in case of early repayment.

 Moratorium period of one year on the principal amount shall be provided to

borrowers for the GECL funding during which interest shall be payable.

 The principal shall be repaid in 36 installments after the moratorium period is

over.

 Pre-payment of facilities to be allowed at no additional charge to the borrower

The additional WCTL (in case of banks and FIs)/ Term loan (in case of NBFCs) facility
granted under GECL shall rank second charge with the existing credit facilities in terms of
cash flows (including repayments) and security

No additional collateral shall be asked for additional funding under GECL

As per decision taken on September 08, 2020, the stipulation of second charge has been
waived in respect of all loans up to Rs.25 lakh (outstanding as on February 29, 2020 plus
loan sanctioned under GECL), subject to MLI ensuring to safeguard the interests of
NCGTC. In this regard, MLI shall obtain a suitable undertaking
No Guarantee Fee shall be charged from the MLIs by NCGTC for the Credit facilities
provided under the Scheme.

The Trustee Company shall provide 100% Guarantee coverage on the outstanding
amount for the credit facility provided under the Scheme as on the date of NPA.
For Banks and FIs, one of the RBI prescribed external benchmark linked rates +1%
subject to a maximum of 9.25% per annum

For NBFCs, the interest rate on GECL shall not exceed 14% per annum
 Automatic pre approved loan upto 20% of Outstanding fund based exposure as on
29.02.2020

 Account should not be SMA 2 or NPA

 MSME borrower whose total exposure is upto Rs 50 Crores as on 29.02.2020 and

annual turnover upto Rs. 250 Crores in F.Y. 2019-20

 MSME Borrower must be GST Registered (exemption where registration is not

applicable)

 One year Moratorium and then 36 monthly installments. No prepayment Charges

Credit Guarantee Scheme for Subordinate
Debt (CGSSD)
The “Distressed Asset Fund - Subordinated Debt for Stressed MSMEs” is a scheme
framed by Ministry of MSME under which credit facility would be provided to the
Promoters of the stressed MSMEs by Scheduled Commercial Banks (SCBs) for infusing
the same as equity/quasi equity/ sub-debt in the unit.
The objective of the scheme is to provide credit facility through lending institutions to
the promoters of stressed MSMEs viz. SMA-2 and NPA accounts who are eligible for
restructuring as per RBI guidelines on the books of the Lending institutions. The promoter
would infuse the credit in the MSME as quasi equity or sub-debt.

 MSME units such as Individuals / Proprietorship, LLP, Partnership, Private Limited

Company or registered company are eligible to be covered under the scheme.

 All Scheduled Commercial Banks are eligible as MLIs.

MSMEs whose accounts have been standard as on 31.03.2018 and have been in regular operations,
either as standard accounts, or as NPA accounts during financial year 2018-19 and financial year
2019-20 are eligible under the Scheme. The Scheme is valid for MSME units which are stressed viz.
SMA2 and NPA accounts as on 30-04-2020.

Accounts declared as Fraud/ Willful defaulter will not be considered under the scheme.

Banks are required to carry out restructuring of MSME accounts as per extant RBI guidelines.

In case a borrower has existing limits with more than one lender, the CGSSD can be availed by the
borrower through one lender only. A declaration from the borrower regarding its other banking
arrangements and that it has not availed funding under the scheme from the other lenders to be
obtained by the lending MLI.
Under the Scheme, Promoter(s) of the MSME unit will be given credit facility equal to
15 % of his/her stake in the MSME entity (equity plus debt) or Rs 75 lakh whichever is
lower as per last audited Balance Sheet.

Illustration 1 : If promoters have invested Rs.100 lakh as equity/debt in a company,

then 15% of Rs.100 lakh, i.e. Rs.15 lakh is eligible amount under subdebt.

Illustration 2 : If promoters have invested Rs.700 lakh as equity/debt in a company,

then 15% of Rs.700 lakh is Rs.105 lakh. However, eligible amount under sub-debt would
be Rs.75 lakh.
The Scheme would be applicable to sub-debt sanctioned under CGSSD for a maximum
period of 10 years from the guarantee availment date or March 31, 2021 whichever is
earlier, or till an amount of Rs 20,000 crore of guarantee amount is approved.
1.50% per annum on the guaranteed amount on outstanding basis.

There is no service fee or any other charge.

 Operational MSMEs which are stressed or NPA can be eligible for this scheme

 This loan is for promoters funding as equity to MSME

 Improves Debt Coverage Ratio

 Promoters of the MSME will be given loan upto 15% of their stake or Rs. 75 Lacs,
whichever is lower

 Principal moratorium 7 Years

 Repayment in next 3 Years

 90% Guarantee Coverage