The Finance Ministry vide notification G.S.R. 559(E) issued on 26th July 2023, the Central Government has approved the ‘Guarantee Scheme for Corporate Debt’ (GSCD) for the purpose of providing guarantee cover against debt raised/ to be raised by Corporate Debt Market Development Fund (CDMDF).
The Scheme shall be named as Guarantee Scheme for Corporate Debt (GSCD) and the Trust/ Fund to manage the scheme shall be named as Guarantee Fund for Corporate Debt (GFCD).
GFCD shall be a Trust Fund formed by Department of Economic Affairs (DEA), Ministry of Finance, Government of India and shall be managed by National Credit Guarantee Trustee Company Ltd. (NCGTC), a wholly owned company of the Department of Financial Services (DFS), Ministry of Finance, Government of India.
To provide 100% guarantee cover against debt raised/to be raised by CDMDF, an Alternative Investment Fund (AIF) created/ to be created under relevant SEBI Regulations, for the purpose of investing in corporate debt securities at times of market dislocation with a view to stabilize the markets.
The guarantee shall cover debt raised, along with interest accrued and other bank charges thereon, and shall not exceed Rs.30,000 crore. The framework for CDMDF has been detailed in Annexure.
The Scheme would be initially for a period of 15 years from the initial closing date of CDMDF, extendable at the discretion of the DEA in consultation with SEBI.
Eligible Unitholders of CDMDF and their contribution
Eligible members of CDMDF shall be:
(i) Debt-oriented Mutual Fund schemes, as may be specified by SEBI from time to time. These schemes shall contribute 25 bps of their Assets Under Management (AUM) and provide additional incremental contributions as their AUM increases on half-yearly basis.
(ii) Existing/ new Asset Management Companies (AMCs) of specified debt-oriented MF schemes shall make a one-time contribution equivalent to 2 bps of their AUM.
The contributions made by the Debt-oriented Mutual Fund schemes and AMC thereof shall be held in the form of investment in units of CDMDF by the contributors.
Guarantee Fee
GFCD shall charge a guarantee fee at 0.5% p.a. of outstanding loans on daily pro-rata basis (i.e. for the period for which loans are raised) till a claim is lodged. This fee shall be paid by the MLIs. The demand advice for guarantee fees shall be auto generated and forwarded to the authorized officer of the MLIs on 1st day of each quarter for loans outstanding during the previous quarter. The MLIs shall recover this guarantee fee from CDMDF.
Guarantee Settlement Mechanism
(i) CDMDF shall enter the details of settlement made as per the waterfall mechanism explained in the framework along with a Statutory Auditor Certificate in this regard;
(ii) Based on the loss estimated, along with the Statutory Auditor Certificate certifying the loss incurred, the MLI shall submit a claim on NCGTC‘s portal.
(iii) Based on the details at (i) & (ii) above, if any payout is made by GFCD at any stage, then NCGTC shall assess the same and arrange to pay the guaranteed amount to MLI in the next 60 days.
Disclosures
(i) There shall be a mechanism for daily disclosure of NAV to the unitholders.
(ii) The portfolio of the Fund would be disclosed to the unitholders on a fortnightly basis.
(iii) The norms applicable to AMCs and MF schemes for disclosure in respect of their investments in CDMDF shall be specified appropriately under the regulatory framework for MFs.
Audit of CDMDF by CAG
CDMDF being floated by SBI AMC may be audited by auditors appointed by C&AG, provisions relating to the same shall be appropriately incorporated in the trust deed of CDMDF. The Department of Economic Affairs (DEA) would request C&AG to appoint auditors for the Fund.
The scheme also covers Activities of CDMDF, Guarantee Issue and Monitoring Mechanism, Agreement to be executed by the CDMDF, Agreement to be executed by the MLIs, Responsibilities of CDMDF under the Scheme, Responsibilities of SEBI under the Scheme.etc. The notification also narrates the Framework for “Corporate Debt Market Development Fund (CDMDF).
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