Credit Guarantee Scheme for Startups
- Launched by: Hon’ble Prime Minister on 16th January 2016 under the Startup India initiative.
- CGSS Notified on: 6th October 2022.
- Sponsored by – Department for Promotion of Industry and Internal Trade, Ministry of Commerce & Industry
- Objective: Provide collateral-free credit guarantee for eligible startups via Scheduled Commercial Banks, AIFIs, NBFCs, and SEBI-registered AIFs.
Eligibility Criteria for Startups:
- Recognised by DPIIT as per official notifications.
- Not classified as Non-Performing Asset (NPA) and not in default to any lender.
- Eligibility certified by the lending institution.
Eligible Lenders:
- Scheduled Commercial Banks
- Non-Banking Financial Companies (NBFCs) rated BBB and above with ₹100+ crore net worth
- SEBI-registered Alternative Investment Funds (AIFs)
Key Features of the Expanded Scheme (2025 Notification)
- Increase in Guarantee Ceiling:
- Raised from ₹10 crore to ₹20 crore per borrower.
- Enhanced Guarantee Coverage:
- 85% of the amount in default for loans up to ₹10 crore.
- 75% of the amount in default for loans above ₹10 crore.
- Reduced Annual Guarantee Fee (AGF):
- For startups in 27 Champion Sectors, AGF reduced from 2% p.a. to 1% p.a.
- Champion Sectors identified under ‘Make in India’ for boosting manufacturing & services.
Impact and Significance
- Increased Credit Availability:
- Encourages more financial institutions to offer credit to startups.
- Facilitates access to working capital, term loans, venture debt.
- Supports Innovation & R&D:
- Startups get greater runway for innovation, experimentation, and tech development.
- Reduces Risk Perception:
- Lowers lending risk for financial institutions.
- Enhances financial flow to early-stage ventures.
- Alignment with Vision of ‘Viksit Bharat’:
- Supports the PM’s vision of an innovation-driven, self-reliant economy.
- Expected to broaden the base of startups benefitting from CGSS.
Enabling Measures and Operational Reforms
- Based on consultations with the startup ecosystem.
- Make the scheme more attractive for lenders and startup borrowers.
- Aim to create a vibrant startup funding ecosystem.
