Subordinate debt worth Rs. 20,000 crores introduced for stressed MSMEs. Those companies which are stressed or even an NPA are eligible for this facility. 2 lakh MSMEs are likely to benefit from this.

1. Subordinate Debt for
Stressed MSMEs
Credit Guarantee Scheme for Subordinate Debt (CGSSD)
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Research Report

2. DISCLAIMER
This presentation is prepared by Prachay group and is provided for
informational purposes only. No representation or warranty, express
or implied, is made as to, and no reliance should be placed on, the
fairness, accuracy, completeness or correctness of the information or
opinions contained in this presentation. Such information and
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opinion, projection, forecast or estimate set forth herein, changes or
subsequently becomes inaccurate. No reader should act on the basis
of any statement contained herein without seeking professional advice.
The group expressly disclaim all and any liability to any person who
has read this presentation, or otherwise, in respect of anything, and
of consequences of anything done, or omitted to be done by any such
person in reliance upon the contents of this presentation.
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3. AGENDA
Focus on MSME
Atmanirbhar Bharat Abhiyan
Brief statistics of Credit and NPA
MSME Scenario
Distress Asset Fund - Subordinate Debt for Stressed
MSME’s
The Scheme
Objective
Introduction
Eligible Loan accounts and Computation of Limits
Eligibility
Tenor of the Debt and General Guidelines
Other Guidelines
Member Lending Institutions (MLIs)
Responsibility of Bankers
Few FAQ’s
Other Aspects
Purpose of the Credit Guarantee Scheme for
Subordinate Debt
Basics of CGSSD

4. Atmanirbhar Bharat Abhiyan
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5. Atmanirbhar Bharat & MSME
Finance Minister Nirmala Sitharaman announced 6 measures for the MSME sector,
as part of the Atmanirbhar Bharat Abhiyan initiative.
1. Rs. 3 lakh crores Collateral free Automatic Loans for Businesses, including
MSMEs
2. Rs. 20,000 crores Subordinate Debt for Stressed MSMEs
3. Rs. 50,000 cr. Equity infusion for MSMEs through Fund of Funds
4. New Definition of MSMEs
5. Global tenders to be disallowed up to Rs. 200 crores
6. E-market linkage for MSMEs and use of FinTech (Financial Technology) for
lending
Critic:
A critical, common feature of these measures, however, is that it hinges on the
premise that financial institutions will be willing to lend/invest and that these
enterprises would avail fresh funds
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6. • Subordinate debt worth Rs. 20,000 crores introduced for stressed MSMEs.
• Those companies which are stressed or even an NPA are eligible for this facility.
• 2 lakh MSMEs are likely to benefit from this.
- FM Nirmala Sitharaman
13th May 2020
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7. MSME Scenario
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8. R 64.04 lakh cr.Total Commercial Borrowing (Dec 19)
27.72%MSME Lending
R 17.75 lakh cr.Credit Exposure to MSME (Jan 20)
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Source: TransUnion CIBIL

9. 17.40%Overall NPA rate on Commercial Lending (Jan ‘20)
11.30%NPA rate for very small borrowers in MSME Sector (Dec ‘19)
18.70%NPA for Medium and Large borrowers in MSME Sector (Dec ‘19)
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Source: TransUnion CIBIL

10. The Scheme
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11. DAF-SDSM
CGSSD
Distress Assets Fund – Subordinate Debt for Stressed
MSME’s (DAF – SDSM)
› Framed by MSME ministry to provide credit facility to the
promoters of stressed MSMEs
› Through Member Lending Institutions (MLI’s) includes all
Scheduled Commercial Banks
› For infusing the same as Equity
Credit Guarantee Scheme for Subordinate Debt (CGSSD)
› It’s the name of Credit Product for which guarantee would
be provided under DAF – SDSM
› Special window to operate under CGTMSE (Trust)
› Date effective : 24th June 2020
› Duration : Maximum period of 10 years from the guarantee
availment date or 31st March 2021 which ever is earlier
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12. Objective
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13. The objective of the scheme is to
provide personal loan through
banks (MLI’s) to the promoters of
stressed MSMEs for infusion as
equity / quasi equity in the business
eligible for restructuring, as per RBI
guidelines for restructuring of
stressed MSME advances.
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To provide guarantees to lending institutions in respect
of additional credit facilities
90% Guarantee Cover under CGSSD to Banks
10% Margin Money from Promoters (as collateral)
Objective
Promoters will be given personal loan by banks, which
will then be infused as equity in the stressed MSME
Units
Stressed MSME units will get Equity support for
Restructuring of account
Government will provide support to CGTMSE,
CGTMSE will provide partial Credit Guarantee
support to Banks

14. Introduction
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15. CGSSD
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Promoters of the stressed
MSME unit will be eligible for
a loan amount equal to 15%
of his/her stake
Applicable to all the promoter
of MSME units under stress
Promoters stake shall include
their direct investment in
equity or in form of debt /
quasi equity
Maximum loan eligibility is
Rs.75 lakhs
In case of consortium
account, CGSSD can be
availed only from one lender
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3
2
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Promoter to infuse funds or
provide collateral to the extent
of 10% of eligible amount
Introduction

16. Eligible
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17. Eligible Loan Accounts
To be eligible, status of Loan Account(s) need to be assessed for the below periods:
As on 31.03.2018
Standard
Status of Loan Accounts
as on 31.03.2018
should be
Standard
F.Y. 18-19 & 19-20
Standard or
NPA
Status of Loan Accounts
during F.Y. 18-19 &19-20
should either be
Standard or NPA
As on 30.04.2020
SMA-2 or
NPA
Status of Loan Account
as on 30.04.2020
should be
SMA-2 or NPA.
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*Accounts of Fraud/Wilful defaulter are not eligible.

18. Particulars
Scenario
1
Scenario
2
Scenario
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Promoters Investment
(including Quasi & Debt)
250.00 500.00 600.00
15% of Promoters Stake
in MSME unit
37.50 75.00 90.00
Sub-debt eligible
(15% or Rs.75 lakhs w.e.l.)
37.50 75.00 75.00
CGSSD Cover - 90% 33.75 67.50 67.50
Promoters Guarantee - 10% 3.75 7.50 7.50
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 R 75 lakh whichever is
lower as per last audited Balance Sheet.
Maximum Sub-Debt Eligible
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(R in lakhs)
Eligible Limit : Computation

19. Maximum 3 years
Repayment Period after
completion of moratorium
(No charges/penalty on pre-payment )
Maximum 7 years
Moratorium Period for
repayment of principal
(the borrower shall be liable to
pay monthly interest)
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Tenor of the Sub-Debt
Total Loan Tenure: Maximum 10 years

20. Guidelines
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21. Interest Rate
Security
Guarantee Fee
Eligible MSME
Constitutions
Eligible Member
Lending
Institutions
Linked to the
external benchmark
rates, as per RBI
guidelines for loans
to MSME and
1.5% p.a. on the
guaranteed
amount (on
outstanding basis)
All Scheduled
Commercial Banks
are eligible as
MLIs.
Second charge on
the assets financed
under existing
facilities
Individuals /
Proprietorship,
LLP, Partnership,
Private Limited
Company or
registered
company
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General Guidelines

22. Responsibility of Bankers
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Ensure that funds so
released are brought
back in MSME Unit
01
Carry out necessary
due diligence02
Closely monitor the
borrowers account03
Exercise all the
necessary precautions
and maintain its recourse
to the borrower for
entire amount of credit
facility
04
Intimation to trust if
the account turns NPA06
Initiate such necessary
actions for recovery of the
outstanding amount
07
Submit such
statements and furnish
necessary information
as the trust may
require
08
Apply to Trust for
Guarantee Coverage05
Responsibility of Bankers (MLI’s)

24. Other Aspects
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25. In respect of defaulted cases, which
are covered under the Scheme, the
lending institutions with the
permission of Trust can opt for
OTS.
In order to avail claim, legal action
must be initiated by the MLI even in
the event of OTS.
Can a lending institution go
for one-time settlement (OTS)
As per the RBI guidelines,
restructuring is possible only for
running units.
Thus, for MSME borrowers/units to
be eligible under this scheme, should
be operational and commercially
viable as per the assessment of
lending institutions.
Are closed units eligible under
the scheme
Cases where legal / recovery
proceedings are going on
In cases where recovery proceedings
are underway and banks assess that,
with the facilities provided under the
scheme the account would be viable,
the banks can withdraw the recovery
proceedings and opt for this scheme
before going ahead with
restructuring etc.
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Other Aspects

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Thank You !!
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