Cabinet approves Rs 20,000 crore distressed assets fund for MSMEs

The scheme provides debt facility of up to 15 percent of the promoter contribution or Rs 75 lakh to the promoters.

Moneycontrol News

June 01, 2020 / 16:32 IST

New Delhi: Union Minister Prakash Javadekar

In order to support stressed micro, small and medium enterprises (MSMEs), the Centre rolled out a Rs 20,000 crore distressed asset fund to extend support to promoters of distress units.

The government will provide guarantee coverage of up to 85 percent for loans up to Rs 5 lakh and 75 percent for loans beyond Rs 5 lakh from financial institutions.

The scheme provides debt facility to distressed MSEMs up to 15 percent of the promoter contribution or Rs 75 lakh to promoters. The promoters can, in turn, infuse the amount into the MSME as equity, thereby enhancing the liquidity and maintain the debt-equity ratio.

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The quasi equity provision with the guarantee balances the risks and rewards between the lender and the customer. In a situation where an outright loan is too risky quasi equity with guarantee will provide the requisite financing to the company, the Centre said.

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