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NPA, Extent of Guarantee Cover, Claims

1. What is the guarantee coverage for the sub-debt under CGSSD?

The guarantee coverage of the sub-debt shall be 90%.

2. Are Member Lending Institutions (MLIs) required to notify if the account has turned NPA, in CGTMSE Portal?

Yes, the MLIs are required to mark a particular case as NPA which is classified as NPA as per RBI guidelines in CGTMSE online portal. The NPA marking needs to be done by the MLIs within next quarter from the NPA date, in the online portal.

3. When can the Lending Institution invoke the guarantee?

For MLI to lodge a claim, the guarantee in respect of that credit facility should have been in force at the time of account turning NPA and after completion of lock-in period of 18 months (from the guarantee start date or last disbursement date whichever is later). MLI can invoke the guarantee for first instalment of claim (75%) only after initiation of legal action under various legal forums such as, SARFAESI (u/s 13 (4)), Revenue Recovery Authority (RRA), Civil Court, Debt Recovery Tribunal (DRT) or Lok Adalat.

4. How will the guaranteed amount be paid by CGTMSE to the MLIs on invocation of the guarantee?

After satisfying itself about the procedural aspects met by the lender, regarding lodgement / preferment of claim for guarantee, the Trust settle the claim in two instalments i.e. 75% of the eligible amount (i.e. 90% of amount in default) as First instalment and 25% of the eligible amount (i.e. 90% of amount in default) as Second instalment.

Illustration: (in ₹.)

Sub-debt given to promoter by the Bank (Guarantee Amount)




Outstanding as the time of

NPA (Guaranteed amount minus repayment)




CGTMSE coverage




Eligible     Claim     Amount (90% of O/s)




1st claim paid by CGTMSE (75%)




2nd       claim       paid      by CGTMSE (25%)




Note: Any recovery made by the lender after settlement of the claim has to be refunded back to CGTMSE as per the existing guidelines.

5. Whether NPA account can be restructured through CGSSD Scheme?


6. If NPA MSME unit having economic & technical viability; but Bank has notallowed operations in his/her NPA account due to overdrawing in the account; iseligible under the scheme or not?

Such accounts would be eligible in cases where the Bank has disallowed operation in the NPA account. In such cases based on bank’s due diligence and lending policy guidelines, the bank may consider allowing operations in the NPA account after disbursal of the sub-debt facility.

7. What is the guideline for NPA classification post restructuring of account under the scheme?

Post restructuring, NPA classification of the accounts shall be as per the extant RBI guidelines.

8. Whether CGSSD account is also to be classified as NPA as per RBI guidelines (same Customer) if the MSME unit, with constitution as Individual, is classified as NPA?

Yes. As per RBI's’ Income Recognition and Classification (IRAC) norms, asset classification is borrower-wise and not facility-wise. In this case, if the customer ID for both the entity and the promoter is the same, and the borrowers account for the entity is classified as NPA, the CGSSD account will also be classified as NPA as per RBI guidelines. NPA accounts can also be restructured through CGSSD Scheme.

9. While considering the loan under the scheme, existing account/s of the borrower shall be restructured as per the assessment of viability. Whether asset classification of the existing account/s will be downgraded in case of SMA2 accounts as per IRAC norms of RBI and what will be the asset classification of the newly opened account under the Scheme.

The loan is given to the promoters of the entity which he infuses as quasi equity in the unit. Asset classification of the newly opened account would be standard until and unless the repayments are serviced as per instalments. This account would turn into NPA as per RBI guidelines, if the monthly payments are not serviced. In addition, if the Banks decide to restructure the existing account/s of the MSME unit post infusion of equity by the promoter(s), applicable RBls guidelines for restructuring will apply. MSMEs with aggregate exposure (including non-fund based facilities) not exceeding Rs 25 crore and classified as standard are eligible under RBI’s one-time restructuring scheme for MSMEs subject to certain conditions as per circular BR.No.BP.BC. 18/21. 04.048/2018-19 dated 1.1.2019, as amended on 11.2.2020 and 6.8.2020. MSMEs with aggregate exposure exceeding ₹. 25 crore or MSMEs classified as NPA will be eligible for restructuring as per RBls guidelines provided in circular DBR. No. BP.BC. 45 / 21. 04.048/2018-19 dated 7 June 2019 titled ‘Prudential Framework for Resolution of Stressed Assets’ and as revised from time to time.

NPA, Extent of Guarantee Cover, Claims