The much-awaited Credit Guarantee Scheme for Subordinate Debt for MSMEs was launched last week. Amid the COVID-19 crisis, it was felt that the biggest challenge for stressed MSMEs was in getting capital, and accordingly as part of Atmanirbhar Bharat package, the Finance Minister on May 13 announced this Rs 20,000 crore scheme for promoters of operational but stressed MSMEs. Since then, the sector has eagerly been waiting for the scheme, and now its launch is a big relief.

The scheme is applicable for those MSMEs whose accounts have been standard as of March 31, 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. It will be valid for MSME units which are stressed, which are SMA-2 and NPA accounts as on April 30, 2020 who are eligible for restructuring as per the RBI guidelines. Promoters will be given credit equal to 15 percent of his/her stake (equity plus debt) or Rs 75 lakh whichever is lower.

In another positive development, the Union Cabinet also allowed all non-banking financial companies (NBFCs) to provide discount loans to MSMEs against dues from government departments, through the TReDS platform on which so far only a selected NBFCs and banks were permitted. This step will help ease the liquidity flow of MSMEs as they get their dues on the bills generated from government departments and agencies after 90 days.

Meanwhile, loans disbursed under the Emergency Credit Line Guarantee Scheme (ECLGS) reached close to Rs 1.02 lakh crore while the total sanctioned amount stood over Rs 1.51 lakh crore as of August 18, 2020. This development is welcome, with sanctions increasing by about Rs 12,000 crore and disbursement by close to Rs 10,000 crore in the last 15 days. It seems the government is going all out to ensure that liquidity concerns of our MSMEs addressed adequately.

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