Distressed Assets Fund-Subordinate Debt for Stressed MSMEs

To provide personal loan through Lending Institutions to the promoters of
stressed MSMEs for infusion as equity in the business eligible for
restructuring and also to provide guarantee coverage for sub debt in
respect of restructuring of debt.

  •  The account of the MSME should be standard as on 31.03.2018.
  • The account should have been in regular operations during FY 2018-19 and FY
    2019-20, either as standard account or as NPA account.
  • The account should have been classified as SMA-2 or NPA as on 30.04.2020
  • Fraud/ Willful defaulter accounts will not be considered under the proposed
    scheme.
  •  Project should be commercially viable.
  • Promoter of eligible MSME will get personal loan of 15% of his/her stake in
    entity (whether as equity or debt) or Rs. 75 Lakhs whichever is lower.
  • Promoter needs to introduce amount of debt as promoter’s contribution in
    the form of equity.
  • The scheme (Credit guarantee scheme for subordinate debt) will provide
    guarantee coverage of 90% and remaining 10% needs to be provided by
    concerned Promoter.
  • All scheduled commercial banks will be eligible to sanction abovementioned
    loan after conducting due diligence so as to assess viability of the project.
  • Account can get classified from NPA to Standard.
  • Debt equity ratio will get improved as the above loan will be considered as
    equity contribution.
  • The lending institution can not adjust wholly or partially the loan amount
    sanctioned against outstanding debt or over dues to lending institution.
  • 2nd charge will get created on assets already mortgaged for existing facilities.
  • Maximum tenor of repayment will be of 10 years commencing from the date
    of guarantee availment or 31st March, 2021 whichever is earlier.
  • Borrower will get moratorium period of maximum upto 7 years during which
    only interest on outstanding principal needs to be paid on monthly basis.
  • After completion of moratorium, principal needs to be repaid in maximum 3
  • Pre-payment of loan is permitted at no additional charge /penalty to the
    borrower.
    Years.
  • Yes, there will be guarantee fees to be borne by the borrower as per the
    agreement between borrower and Lending Institution.
  • Guarantee fees will be charged at 1.5% per annum on the guaranteed amount
    on the outstanding basis
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