The government has extended the validity by one year of a key scheme that was aimed at bolstering equity support to micro, small and medium enterprises (MSMEs), by facilitating Rs 20,000 crore as subordinate debt.

The credit guarantee scheme for subordinate debt will now remain in force until March 31, 2023, as the government has acceded to industry request for an extension to help a wider pool of small businesses, according to an official statement.

Realising that stressed MSMEs will find it harder to get credit, the government had in May 2020 announced the subordinate debt scheme, as part of its Aatma Nirbhar Bharat Package to soften the Covid blow to individuals as well as businesses.

It was designed to provide credit facility through lending institutions to the promoters of stressed MSMEs (SMA-2 and non-performing asset accounts) who are eligible for restructuring, as per the Reserve Bank of India’s guidelines.

Initially, the scheme was valid up to March 2021, which was then extended until March 2022 “in order to keep the avenues of assistance to stressed MSME units open”. This scheme was aimed at benefitting 2,00,000 stressed MSMEs.

Under this scheme, the government was to provide Rs 4,000 crore to the state-run Credit Guarantee Fund Trust for Micro and Small Enterprises, which would offer partial credit guarantee to banks. In turn, promoters of the stressed MSMEs can approach the banks for loans, which will then be infused by them as equity in their units.