The Union Cabinet on Monday approved a distressed asset fund for MSMEs to facilitate provision of Rs 20,000 crore as subordinate debt.
The scheme was announced by Finance Minister Nirmala Sitharaman last month under the 'Aatmanirbhar Bharat'economic package.
The government contribution to the distressed asset fund is Rs 4,000 crore through its investment in the Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE) set up by it along with Sidbi. The CGTMSE, in turn, provides partial credit guarantee to banks.
Functioning MSMEs which have become non-performing assets or are stressed will be eligible for access to the fund.
Under the scheme, the Centre will provide guarantee coverage of up to 85 per cent for loans up to Rs 5 lakh and 75 per cent for loans beyond Rs 5 lakh to MSMEs from financial institutions.
It provides a debt facility of up to 15 per cent of promoter contribution or Rs 75 lakh to the promoters, who, in turn, will infuse the amount in the MSME unit as equity.
According to the government, around 2 lakh MSMEs will be benefited by the move.
Further, the Union Cabinet on Monday also approved the Rs 50,000 crore fund of fund for MSMEs which would help these entities to get equity.
The fund of funds will be set up with a corpus of Rs 10,000 crore and provide equity funding for MSMEs. It will be operated through a Mother Fund and a few daughter funds and its structure will help leverage Rs 50,000 crore of funds at daughter funds level.
It will also help MSMEs to get listed on the main board of stock exchanges.
( With inputs from IANS )