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.
The Rs 20,000 crore fund is expected to benefit nearly two lakh MSMEs.
PM Narendra Modi chaired Union Cabinet meeting, earlier today. This was the first meeting of Union Cabinet after Central Government entered into its second year in office. The Cabinet Committee on Economic Affairs (CCEA) also met PM Modi at his residence today.
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