Rs 20,000-cr subordinate debt scheme: Nine months after launch, only this many MSMEs benefited

By: |
March 20, 2021 8:14 PM

Credit and Finance for MSMEs: The scheme allowed stressed or NPA MSME accounts as of April 30, 2020, to raise credit equivalent to 15 per cent of their stake (equity plus debt) in the business or Rs 75 lakh whichever is lower.

Launched on April 8, 2015, PMMY offered up to Rs 50,000 loan under the Shishu cover, Rs 50,000 – 5 lakh loan under the Kishor cover, and Rs 5 lakh – Rs 10 lakh under the Tarun cover to non-corporate, non-farm MSEs.

Credit and Finance for MSMEs: Around nine months after the Modi government launched the Rs 20,000-crore subordinate debt scheme for stressed MSMEs, the number of beneficiaries as of March 4, 2021, stood at only 332 involving an amount of Rs 38.5 crore, up from 272 loans amounting to Rs 30.84 crore as of February 4, 2021. The data was shared by MSME Minister Nitin Gadkari in a written reply to a question in the Rajya Sabha on Friday. The scheme was launched by the government in June 2020 and operationalized in August to support 2 lakh Covid-hit MSMEs that are non-performing assets (NPAs) or stressed. The scheme was part of the Rs 3.7-lakh-crore MSME package under the Rs 20-lakh-crore stimulus package announced by the government last year.

MSMEs in Tamil Nadu had secured maximum guarantees (53) involving Rs 555.42 crore followed by Punjab (39) involving Rs 339.98 crore, Maharashtra with 32 guarantees worth Rs 385.06 crore, Madhya Pradesh with 30 guarantees worth Rs 330.29 crore, Karnataka with 26 guarantees involving Rs 516.87 crore and more, according to the data from the Credit Guarantee Trust for Micro and Small Enterprises.

Also read: CEA Krishnamurthy Subramanian: Mindset of always asking what govt can do for startups should change

According to the scheme, stressed or NPA MSME accounts as of April 30, 2020, are eligible to raise credit equivalent to 15 per cent of their stake (equity plus debt) in the business or Rs 75 lakh whichever is lower. Promoters of the businesses are also required to invest the debt raised in the business as equity to improve liquidity and maintain the debt-equity ratio. While 90 per cent of the guarantee coverage comes from the scheme, the remaining 10 per cent has to be contributed by promoters of the MSME. The scheme offered a 7-year moratorium for eligible accounts for paying the principal amount while the maximum period for repayment was 10 years.

Among the high NPA risk sectors identified by the majority of bankers in the FICCI-IBA Bankers’ Survey July-December, 2020 survey were tourism and hospitality, MSME, aviation, and restaurants. 84 per cent respondents expected an increase in MSME NPAs in the first half of 2021 while 89 per cent respondents expected the same in the restaurant sector. RBI in its second bi-monthly policy meeting on August 6, 2020, had extended the provision of a one-time restructuring scheme for MSMEs without downgrade on asset quality till December 2020.

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