Government notifies the expansion of the Credit Guarantee Scheme for Startups (CGSS) to increase capital mobilization for startups

The Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry, has notified the expansion of the Credit Guarantee Scheme for Startups (CGSS) to increase capital mobilization for startups. The revised scheme raises the guarantee cover ceiling per borrower from Rs. 10 crore (US$ 1.17 million) to Rs. 20 crore (US$ 2.34 million). The extent of guaranteed cover has also been enhanced to 85% of the amount in default for loans up to Rs. 10 crore (US$ 1.17 million) and 75% for loans exceeding that amount. Additionally, the Annual Guarantee Fee (AGF) for startups in 27 Champion Sectors has been reduced from 2% p.a. to 1% p.a. These sectors, identified under the “Make in India” initiative, are set to benefit from more attractive funding and a boost to innovation in domestic manufacturing and self-reliance. The expanded scheme aligns with Prime Minister Mr. Narendra Modi’s vision of transforming India into an innovation-driven, self-reliant economy by addressing the financing needs of startups.
The increased guaranteed support and coverage are expected to attract more financial institutions to provide credit to startups, increasing overall fund flow. This will reduce the perceived risks of lending to startups, enabling greater financial support for research and development (R&D), experimentation, and the creation of cutting-edge technologies. The expanded CGSS also includes operational reforms and enabling measures identified through consultations with the startup ecosystem, making it more attractive for lenders and startups seeking funding. These changes will propel the country towards becoming a developed nation by fostering a vibrant startup ecosystem. The CGSS was initially approved in October 2022 to provide collateral-free debt funding to startups through various financial institutions. The Union Budget 2025-26 proposed enhancing credit availability with guarantee cover to further catalyse entrepreneurship.

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