Credit Guarantee Scheme for Subordinate Debt (CGSSD)

On 14th March Ministry of Micro, Small and Medium Enterprises (MSMEs) announced the extension of the Credit Guarantee Scheme for Subordinate Debt (CGSSD) by another year.

About extension of the scheme

Launched in June 2020, the Credit Guarantee Scheme for Subordinate Debt (CGSSD) was initially valid till March 31st, 2021. However, the scheme was later extended till March 31st, 2022 to continue to help the stressed Micro, Small, and Medium Enterprises (MSMEs). The latest extension till March 31st, 2023 was based on the requests received by the MSME ministry from various stakeholders of the scheme.

About the scheme

  • The scheme provides credit facility to the promoters of stressed MSMEs that are eligible for restructuring as per RBI guidelines. This credit facility is provided through banks and this facility is even available to special mention accounts (SMA)-2 and non-performing asset (NPA) accounts.
  • According to the 2021-22 annual report of the MSME ministry, there is a proposal to modify the scheme guidelines, as the scheme hasn’t seen much traction among eligible MSMEs.
  • As of December 31, 2021, guarantees amounting to only Rs 81.78 crore were extended to 756 eligible borrowers. Whereas, the government’s target is to guarantee loans to the tune of Rs 20,000 crore.

About the Special mention accounts (SMAs)

The Special mention accounts (SMAs) are those accounts that show symptoms of bad asset quality within 90 days, before being identified as non-performing asset (NPA) accounts. SMA-0 accounts are the ones with payments overdue for 1-30 days. SMA-1 accounts and SMA-2 accounts are the accounts having payments overdue for 31-60 days & 61-90 days, respectively.

About the Subordinate debt

Subordinate debt is a type of unsecured loan or bond that is paid after all other senior loans or securities are repaid, in the case of borrower default.

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