**Policy Summary: RBI20202109 - Distressed Assets Fund: Subordinate Debt for Stressed MSMEs**
This circular, RBI20202109 DoR.BP.BC.No.0121.04.048202021, issued on July 1, 2020, by the Reserve Bank of India (RBI) to all Scheduled Commercial Banks, including Scheduled Regional Rural Banks (RRBs), concerns the treatment of funds infused by promoters into their Micro, Small, and Medium Enterprise (MSME) units under the Distressed Assets Fund – Subordinate Debt for Stressed MSMEs scheme.
Referring to circular No. 170/2020-21 dated June 24, 2020, issued by the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) regarding the same scheme, the RBI has decided to permit banks a special dispensation. Banks may now reckon the funds infused by promoters in their MSME units through loans availed under this scheme as equity/quasi-equity from the promoters for debt-equity computation. This decision is based on the credit facilities extended under the scheme being backed by a guarantee from CGTMSE.
Saurav Sinha, Chief General Manager-in-Charge, is the contact person for inquiries related to this circular.
Key Entities Referenced
Reserve Bank of India: Regulatory body, referred to via abbreviation RBI in the document ID.
Distressed Assets Fund – Subordinate Debt for Stressed MSMEs: Initiative designed to provide financial assistance to Micro, Small and Medium Enterprises (MSMEs) facing financial distress.
Scheduled Commercial Banks: Banks included in the Second Schedule to the Reserve Bank of India Act, 1934.
Scheduled Regional Rural Banks: Regional Rural Banks included in the Second Schedule to the Reserve Bank of India Act, 1934.
Credit Guarantee Fund Trust for Micro and Small Enterprises: Trust established to provide credit guarantees to lenders for extending credit to Micro and Small Enterprises (MSEs). Abbreviated as CGTMSE.
Micro and Small Enterprises: Enterprises as defined under the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006.
MSME: An abbreviation for Micro, Small and Medium Enterprises.
Saurav Sinha: Chief General Manager-in-Charge at Reserve Bank of India
RBI/2020-21/09
DoR.BP.BC.No.01/21.04.048/2020-21 July 1, 2020
All Scheduled Commercial Banks (including Scheduled RRBs)
Dear Sir/ Madam,
Distressed Assets Fund - Subordinate Debt for Stressed MSMEs
Please refer to the circular No. 170/2020-21 dated June 24, 2020 issued by the Credit
Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) regarding the
captioned scheme. As the credit facilities extended under the above scheme are
backed by a guarantee from CGTMSE, as a special dispensation, it has been decided
to permit the banks to reckon the funds infused by the promoters in their MSME units
through loans availed under the captioned scheme as equity/quasi equity from the
promoters for debt-equity computation.
Yours faithfully,
(Saurav Sinha)
Chief General Manager-in-Charge