Eligibility
a. The Scheme is applicable for those MSMEs whose accounts have been standard as on 31.03.2018 and have been in regular operations, either as standard accounts, or as NPA accounts during financial year 2018-19 and financial year 2019-20.
b. Fraud/ Wilful defaulter accounts will not be considered under the proposed scheme.
Purpose
a. To provide guarantee coverage for the Credit Guarantee Scheme for Subordinate Debt to provide Sub-Debt support in respect of restructuring of MSMEs.
b. 90% guarantee coverage would come from scheme/ CGTMSE and remaining 10% from the concerned promoter(s)
Quantum of Finance
Personal loan will be provided to the promoters of the MSME unit.
Under the Sub-debt scheme, finance shall be extended to support the promoter (s) of the distressed MSME units through a debt facility of up to 15% of the promoter contribution (equity plus debt) or Rs 75 lakh whichever is lower.
This personal loan shall not exceed the original debt of the beneficiary.
Margin
The promoters are required to bring in 10% of the sub-debt amount as collateral.
Security / guarantee
The sub-debt facility so sanctioned by Bank will rank/have 2nd charge of the existing assets financed under existing facilities for the entire tenor of the sub-debt facility.
Guarantee: Extension of existing security/ Personal/ Corporate guarantee of promoters/ concern/ group concerns/ guarantors, as applicable.
Repayment
a. The maximum tenor for repayment will be 10 years. There will be a moratorium of 7 years (maximum) on the payment of principal. Till the 7th year, only interest will be paid.
b. While the interest on the sub-debt under the scheme would be required to be serviced regularly (monthly), the principal (along with interest) shall be repaid within a maximum of 3 years, after completion of moratorium, in 36 Equated Monthly Installments (EMIs).
Credits – Union Bank of India