Govt Expands Credit Guarantee Scheme to Boost Startup Funding

The Government of India has announced the expansion of the Credit Guarantee Scheme for Startups (CGSS), aiming to improve access to credit and promote innovation-driven businesses. The Department for Promotion of Industry and Internal Trade (DPIIT), under the Ministry of Commerce and Industry, has officially notified changes that enhance the scheme’s support for startups.

Under the revised scheme, the maximum guarantee cover per startup has been increased from ₹10 crore to ₹20 crore. In addition, the extent of guarantee coverage has been raised to 85% of the amount in default for loans up to ₹10 crore, and 75% for loans above ₹10 crore. These steps are expected to reduce the risk for lenders and encourage them to fund more startups.

The Annual Guarantee Fee (AGF) has also been reduced to 1% per year for startups operating in 27 Champion Sectors identified under the ‘Make in India’ initiative. These sectors represent key industries where India seeks to enhance domestic manufacturing and service capabilities. The fee reduction will make credit more affordable and attractive for startups in these sectors.

The expanded CGSS is designed to support Prime Minister Narendra Modi’s vision of building a self-reliant and innovation-led economy. With better guarantee support, more financial institutions are likely to offer credit to startups, increasing capital flow into early-stage businesses.

Launched in 2016 under the Startup India initiative, CGSS was created to provide collateral-free loans to eligible startups through banks, financial institutions, NBFCs, and SEBI-registered AIFs. The scheme supports working capital, term loans, and venture debt.

The recent changes follow stakeholder consultations and are expected to attract more lenders and empower a broader range of startups, contributing to India’s journey toward becoming a developed and innovation-driven economy.

Source: PIB