🛡️ Other Guarantee Schemes
Detailed guide to CEGSSC, CGSSD, GSCD, and LGSCAS schemes for specialized credit guarantees.
1. Credit Enhancement Guarantee Scheme for Scheduled Castes (CEGSSC)
This scheme was launched by the Ministry of Social Justice & Empowerment on 6th May 2015 to address the difficulty Scheduled Caste entrepreneurs face in accessing credit due to a lack of collateral.
Objective: To promote entrepreneurship among Scheduled Caste (SC) entrepreneurs by providing credit enhancement guarantees. "Credit enhancement" essentially means improving the creditworthiness of a borrower, giving banks the confidence to lend to them even without sufficient collateral.
- Nodal Agency: The scheme is managed by IFCI Ltd (Industrial Finance Corporation of India).
- Guarantee Range: It covers loans ranging from ₹15 Lakh to ₹5 Crore, targeting medium-sized enterprises rather than micro units.
- Max Tenure: The guarantee is valid for up to 7 years or the loan repayment period, whichever is earlier.
Eligibility Criteria
To avail of this benefit, the borrower must fall into one of these categories:
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1. Credit Enhancement Guarantee Scheme for Scheduled Castes (CEGSSC)
This scheme was launched by the Ministry of Social Justice & Empowerment on 6th May 2015 to address the difficulty Scheduled Caste entrepreneurs face in accessing credit due to a lack of collateral.
Objective: To promote entrepreneurship among Scheduled Caste (SC) entrepreneurs by providing credit enhancement guarantees. "Credit enhancement" essentially means improving the creditworthiness of a borrower, giving banks the confidence to lend to them even without sufficient collateral.
- Nodal Agency: The scheme is managed by IFCI Ltd (Industrial Finance Corporation of India).
- Guarantee Range: It covers loans ranging from ₹15 Lakh to ₹5 Crore, targeting medium-sized enterprises rather than micro units.
- Max Tenure: The guarantee is valid for up to 7 years or the loan repayment period, whichever is earlier.
Eligibility Criteria
To avail of this benefit, the borrower must fall into one of these categories:
- Individual SC Entrepreneurs.
- Registered Companies/Societies: The entity must have more than 51% shareholding held by SC members, ensuring majority ownership.
- Partnership/Proprietorship Firms: The management control must rest with SC individuals for at least 6 months prior to application.
Guarantee Cover Details
The extent of guarantee provided to the lending bank depends on the loan amount. Smaller loans get higher protection to encourage lending to smaller players.
| Loan Amount | Guarantee Cover |
|---|---|
| ₹15 Lakh to ₹1 Crore | 100% (Full risk coverage for banks) |
| ₹1 Crore to ₹2 Crore | 80% |
| ₹2 Crore to ₹5 Crore | 70% |
| Above ₹5 Crore | 60% (Banks bear more risk for very large loans) |
2. Credit Guarantee Scheme for Subordinate Debt (CGSSD)
CAUTION
Status: CLOSED This scheme was a special relief measure. Validity expired on 31.03.2023. It is no longer accepting new applications, though existing guarantees continue for their tenure.
Also known as the "Distressed Assets Fund - Subordinate Debt for Stressed MSMEs", this scheme is unique because it helps businesses that are already in trouble.
Objective: To provide equity support to the promoters of stressed MSMEs. Since stressed businesses cannot easily get new loans, this scheme gives money to the promoter personally, who then invests it back into their business as equity (capital), improving the company's financial health and debt-to-equity ratio.
- Corpus: ₹4,000 Crore fund provided by the MSME Ministry to back these guarantees.
- Status: Expired on 31.03.2023 (Closed for new loans).
Eligibility
This scheme is specifically for MSMEs that were facing financial trouble but were viable before the stress period:
- Standard accounts as of 01.01.2016 (meaning they were paying dues regularly back then).
- Operations: The business must have been running regularly during FY 2018-19 and 2019-20.
- Status: The account became SMA-2 (Special Mention Account-2, meaning overdue by 61-90 days) or NPA (Non-Performing Asset, overdue by >90 days) as on 30.04.2020.
Loan Structure (Personal Loan to Promoter)
Unlike normal business loans, this is a personal loan given to the promoter, not the company directly.
- Loan Amount: The loan is capped at 50% of the promoter's existing stake (equity + debt) in the business OR a maximum of ₹75 Lakh, whichever is lower.
- Usage: The promoter must infuse this entire amount into the MSME unit as equity. This turns debt into capital, strengthening the balance sheet.
- Tenure: The loan has a maximum tenure of 10 years, which includes a generous 7-year moratorium on principal repayment (you only pay interest for the first 7 years).
- Interest: Must be paid monthly.
Guarantee Mechanism
- 90% Cover: Provided by CGTMSE, meaning banks are largely protected if the promoter defaults.
- 10% Risk: Borne by the Promoter/MSME (the remaining risk).
- Fee: A guarantee fee of 1.50% p.a. is charged on the original loan balance.
3. Guarantee Scheme for Corporate Debt (GSCD)
TIP
Status: ACTIVE This scheme is currently active and relevant for the corporate bond market.
Notified on 26th July 2023, this scheme aims to stabilize the corporate bond market, which often faces liquidity issues during crises.
Objective: To provide a guarantee cover for debt raised by the Corporate Debt Market Development Fund (CDMDF). The CDMDF steps in to buy corporate debt during times of market dislocation (crisis), and GSCD guarantees the funds it raises to do so.
- Fund Manager: Managed by NCGTC (National Credit Guarantee Trustee Company).
- Max Guarantee Limit: The total guarantee available is ₹30,000 Crore.
- Guarantee Cover: It offers 100% protection for funds raised by the CDMDF.
- Duration: The scheme is valid for 15 years.
About CDMDF
- Structure: It is an Alternative Investment Fund (AIF) regulated by SEBI.
- Role: It acts as a safety net, buying investment-grade corporate debt securities when the market is witnessing stress, thereby providing necessary liquidity to the market.
- Funding: The fund is financed by contributions from Debt Mutual Funds (25 bps or 0.25% of their AUM) and Asset Management Companies (AMCs) (2 bps of AUM).
Summary Cheat Sheet
| Concept / Topic | Key Details / Explanation |
|---|---|
| 1. CEGSSC Objective | Credit Enhancement Guarantee Scheme for Scheduled Castes (SC). Helps SC entrepreneurs get loans without collateral. |
| CEGSSC Eligibility | SC Individuals, Registered Companies (>51% SC share), or Firms (SC control > 6 months). |
| CEGSSC Loan Limits | Loan range: ₹15 Lakh to ₹5 Crore. |
| CEGSSC Guarantee | 100% cover for loans up to ₹1 Cr. Scaling down to 60% for >₹5 Cr loans. Managed by IFCI Ltd. Tenure: Max 7 years. |
| 2. CGSSD Objective | Credit Guarantee Scheme for Subordinate Debt. Focus: Stressed MSMEs (SMA-2 or NPA as on 30.04.2020). |
| CGSSD Structure | Personal Loan to the Promoter (Not the company). Promoter must invest it as Equity into the unit. |
| CGSSD Loan Amount | Max ₹75 Lakh or 50% of promoter's stake (whichever is lower). |
| CGSSD Repayment | Tenure: 10 Years. Moratorium: 7 Years on principal payment. Guarantee: 90% by CGTMSE. |
| 3. GSCD Objective | Guarantee Scheme for Corporate Debt. Stabilizes corporate bond market during crisis (market dislocation). |
| GSCD Mechanism | NCGTC provides 100% guarantee to funds raised by CDMDF (Corporate Debt Market Development Fund). |
| CDMDF Funding | Funded by Debt Mutual Funds (0.25% of AUM) and AMCs (0.02% of AUM). Regulated by SEBI. |
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