Credit and Finance for MSMEs: The Rs 20,000-crore Credit Guarantee Scheme for Subordinate Debt (CGSSD) launched in June 2020 to support stressed MSMEs or non-performing asset (NPA) accounts is yet to attract a sizeable number of potential beneficiaries. In fact, the beneficiary count has dropped 37 per cent from a mere 473 in the financial year 2020-21 to 298 in FY22, according to the data shared by Union Minister of State for Finance Bhagwat Karad in a written reply to a question in Lok Sabha on Monday.
The total beneficiary count under CGSSD stood at 771 as of March 2022. According to the MSME Ministry’s FY22 annual report, the scheme had extended guarantees amounting to Rs 81.78 crore to 756 borrowers as of December 31, 2021, indicating only 15 new beneficiaries were added till March this year.
Importantly, CGSSD was launched by the government only a month after the Emergency Credit Line Guarantee Scheme (ECLGS) was introduced in May 2020. According to Sunil Mehta, Chief Executive Officer of the Indian Banks’ Association, ECLGS turned out to be more MSME-friendly in comparison to CGSSD.
“Instead of opting for restructuring, people (MSMEs) preferred ECLGS as it offered ready credit to remain afloat for the next two to three years and also an option for ECLGS beneficiaries to go for restructuring as well. It was like a ready plate of food that you can have versus the subordinate debt which was like you can starve for some time and create your resistance,” Mehta had earlier told Financial Express Online.
The scheme offers credit via banks to stressed MSMEs including special mention accounts (SMA)-2 and non-perform asset (NPA) accounts that are eligible for restructuring as per the Reserve Bank of India (RBI) guidelines on the books of the lending institutions. Subordinate debt is essentially referred to as subordinated debenture or junior securities, a kind of unsecured loan or bond that ranks below other senior loans or securities in terms of claims on assets or earnings.
The government had contributed Rs 4,000 to set up a Distressed Assets Fund for the guarantee coverage of loans, of which Rs 157.41 crore was released to the Credit Guarantee Trust for Micro and Small Enterprise (CGTMSE) in March 2021 that operates the scheme, according to the ministry’s annual report. The scheme is currently valid till March 2023 even as the ministry had noted that “the proposal for modification in the scheme guidelines is in progress.”