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Union Credit Guarantee Scheme for Subordinate Debt to MSMEs

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a. Ministry of Micro, Small and Medium Enterprises, has framed a special Scheme for the purpose of providing guarantees in respect of credit facilities extended by Banks to Borrowers in Micro, Small and Medium Enterprises (MSMEs) category. The scheme seeks to extend support to the promoter(s) of the operational MSMEs which are stressed viz SMA-2 and NPA.

b. The Scheme is named as ‘Distressed Assets Fund - Subordinate Debt for Stressed MSMEs’ and the credit product for which guarantee would be provided under the Scheme is named Credit Guarantee Scheme for Subordinate Debt re-christened as Union Credit Guarantee Scheme for Subordinate Debt (UCGSSD) in our Bank.

c. Purpose of UCGSSD Scheme: To provide guarantee coverage for the Credit Guarantee Scheme for Subordinate Debt to provide Sub-Debt support in respect of restructuring of MSMEs. 90% guarantee coverage would come from scheme/ Trust and remaining 10% from the concerned promoter(s).


Eligible Borrowers

a. The Scheme is applicable for those MSMEs whose accounts have been standard as on 01.01.2016 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.

c. Personal loan will be provided to the promoters of the MSME units.

d. The Scheme is valid for MSME units which are stressed, viz. SMA-2 and NPA accounts as on 30.04.2020 and can become commercially viable as per the assessment of the Bank.


Quantum of Finance

Under the scheme, financial assistance shall be provided to support promoter(s) of the distressed MSME units through a debt facility of up to 50% of promoter’s stake (Equity plus Debt) or Rs 75 lakh whichever is lower. This personal loan shall not exceed the original debt of the beneficiary.

Further, the Equity shall be calculated on the basis of the last available audited balance sheet of a Financial Year.



a. The sub-debt facility shall have a maximum tenor of 10 years from the guarantee availment date or March 31, 2021 whichever is earlier.

b. 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.

c. 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).

d. Pre-payment of loan is permitted at no additional charge /penalty to the borrower.




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.