Business Standard

Subordinate debt: A way for govt to hand out cash to needy MSMEs

The scheme provides liquidity to stressed MSMEs without really burdening them with heavy debt obligations and the banks are guaranteed the loan amount so they don't have to worry about repayment

State-owned banks have sanctioned loans, which have 100 per cent sovereign guarantee on defaults, worth Rs 17,706 crore in total

The idea behind the scheme is to provide the promoters of these MSMEs enough capital to invest as equity or quasi-equity into the company

T C A Srinivasa-Raghavan New Delhi
On August 19, the government operationalised the Credit Guarantee Scheme for Subordinate Debt for stressed Micro, Small & Medium Enterprises (MSMEs). It had announced this scheme as part of the Aatma Nirbhar Bharat Package. Here’s a look at what the scheme involves and what it means for MSMEs.

What is subordinate debt?

Subordinate debt is a type of debt that an individual or a company can take on and which has a lower priority of repayment. In other words, in the event of liquidation or bankruptcy, the borrower would first pay off other “senior” debt and obligations and only then

Don't miss the most important news and views of the day. Get them on our Telegram channel

First Published: Aug 24 2020 | 1:48 PM IST

Explore News

To read the full story, subscribe to BS Premium now, at just Rs 249/ month.

Key stories on are available only to BS Premium subscribers.

Register to