1. What will be the risk weight assigned to the credit extended under the scheme?

CGTMSE guaranteed portion to be assigned zero risk weight, as per extant guidelines.

2. What will be the security on credit facility extended under the Scheme?

The credit extended under the scheme will rank second charge on all the existing assets. .

3. Who can provide answers to any further queries?

Please address your queries/suggestions to querysubdebt@cgtmse.in.

4. Please clarify as to which RBI guidelines is required to be referred viz. Notification no./Date for sanction of loan under CGSSD Scheme.

MSMEs with aggregate exposure (including non-fund based facilities) not exceeding ₹25 crore and classified as standard are eligible under RBI’s one-time restructuring scheme for MSMEs subject to certain conditions as per circular DBR.No. BP.BC.18/21.04.048/2018-19 dated 1.1.2019, as amended on 11.02.2020 and 06.08.2020. MSMEs with aggregate exposure exceeding ₹25 crore or MSMEs classified as NPA will be eligible for restructuring as per RBIs guidelines provided in circular DBR.No. BP.BC. 45/21.04.048/2018-19 dated 7 June 2019 titled “Prudential Framework for Resolution of Stressed Assets” and as revised from time to time.

5. Whether grant of sub-debt under CGSSD would amount to a restructuring of the entity concerned?

Credit under CGSSD is to be provided to the promoter, and not to the entity concerned and hence grant of sub-debt under CGSSD would not amount to a restructuring of the entity concerned.

6. In case of partnership /Pvt Ltd/Public Ltd/LLP firm, whether NOC is required from the partner not willing to avail the Sub-debt facility. If Yes, what is the NOC format?

As per the Scheme, the sub-debt facility may be extended to all partners/promoters in proportion to their shareholding in a particular entity. Alternatively, sub-debt facility to the extent of upto 50% of the aggregate promoters / partner contribution (with a cap of ₹75 Lakhs), may also be provided to any of them subject to submission of NO Objection Certificate (NOC) by other partners /promoters.

7. In case of partnership /Pvt Ltd/Public Ltd/LLP firm, please clarify whether the personal loan sanctioned under Subordinate Debt Scheme will be sanctioned in the name of individual or more than one partner/promoter (jointly) or partnership/Pvt Ltd/Public Ltd/LLP firm?

A single CGSSD loan for the eligible amount of all promoters together can also be sanctioned by taking all promoters as co-borrowers of the CGSSD loan. The sub-debt facility, to the extent of upto 50% of the aggregate promoters / partner contribution (with a cap of ₹75 Lakhs), may also be extended to any of the partners / promoters subject to submission of NOC by other partners /promoters.

8. Whether debt component in the books of the borrower should include unsecured loan raised from the promoter/s only or from any other sources as well?

Debt would include any loan provided by the promoter(s) to the MSME unit, including unsecured loans, but would not include loans raised from any other sources. Banks may follow their own internal lending guidelines and conduct appropriate due-diligence to ensure that the unsecured loan given by the promoter(s) to the MSME unit in the books of the MSME unit, and that the terms of the unsecured loans are appropriate.

9. While considering personal loan under sub-debt to the promoters of the MSME Unit, whether overall loans availed by the MSME unit with all the Banks, can be considered to arrive at 50% of the promoter’s equity / debt or ₹75 lakh, whichever is lower and the existing exposure?

Yes. The overall exposure with all the banks of the MSME unit should be considered for arriving at loan amount. A declaration from the borrower regarding its other banking arrangements and that it has not availed funding under the scheme from the other lenders to be obtained by the lending MLI. Also, it may be clarified that the borrower here is the promoter(s) of the MSME unit and not the MSME unit. Hence, the banking relationships being referred to are those of the promoter(s), and hence the need for the declaration of other banking arrangements of the promoter(s).

10. To secure the CGSSD loan, MSME unit has to give corporate guarantee for the said loan. What is the guidelines for creation of second charge over the primary security as there is restriction under the Company’s Act regarding corporate guarantee to secure personal loan in the name of directors/promoters of a company.

Banks may follow their internal lending guidelines to establish linkages between MSME unit and the promoter in order to create second charge over the primary security, including securing a corporate guarantee, if required. Although Section 185 (1) of the Companies Act 2013 restricts directors from obtaining a corporate guarantee to secure personal loan, as per Section 185 (1) (a) (ii) an exemption is provided in case members of the Board approve the scheme under a special resolution. personal loan, as per Section 185 (1) (a) (ii) an exemption is provided in case members of the Board approve the scheme under a special resolution.

11. Whether Tri-partite agreement with MSME unit, Promoters & bank is required and whether this shall be treated as a 3rd party Guarantee & deprive the MLI (our bank) the Guarantee cover from CGTMSE.

As per the guidelines of the scheme, there is no requirement of a Tripartite Agreement.

12. What is the guidelines, if in case, infusion of amount as equity/sub debt/quasi equity into the MSME unit is withdrawn by the promoter(s).

The financial assistance provided as part of the scheme is to be operated as aseparate loan account and the promoter need to infuse the sub-debt / loan amount as promoter’s contribution in the form of equity (including sub-debt or quasi equity) into MSME entity. Further, MLI should ensure that the sub-debt /credit released to the promoter is brought back as equity/quasi equity/sub-debt in the MSME unit. In addition, it may be clarified that Bank may follow their guidelines in terms of internal regular monitoring of the account once a loan has been disbursed.

13. Please Clarify if RBI special Dispensation scheme is not available then how the accounts can be restructured and whether the CGSSD can be sanctioned even without restructuring the Limits.

There is no requirement of restructuring in the scheme. However, the account should be eligible to be restructured as per the RBI guidelines. Hence, the MLI is required to verify only the eligibility for restructuring.