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In a significant push to support innovation, domestic manufacturing, and startup growth, the Government of India has doubled the credit guarantee limit under the Credit Guarantee Scheme for Startups (CGSS) from ?10 crore to ?20 crore per borrower. Additionally, it has enhanced the guarantee coverage and reduced the guarantee fees for selected high-priority sectors.

About CGSS (Credit Guarantee Scheme for Startups)

• Launched: October 2022
• Under: Startup India Action Plan (initiated January 16, 2016)
• Nodal Ministry: Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry
• Implemented by: National Credit Guarantee Trustee Company (NCGTC)
• Objective
  • To enable collateral-free debt funding to DPIIT-recognised startups via:

• • Term loans
  • Working capital
  • Venture debt and other fund-based/non-fund-based credit instruments

• To reduce the perceived credit risk for financial institutions and promote early-stage innovation, R&D, and self-reliant manufacturing.

Key Features of the Expanded CGSS

Parameter                                              Previous Provision                                  Revised Provision

Credit Guarantee Limit                 ?10 crore                                             ?20 crore per borrower

Guarantee Coverage                       75%                                                      85% for loans ≤ ?10 crore, 75% for loans >

                                                                                                                        ?10 crore

Annual Guarantee Fee (AGF)    2%                                                          1% for startups in 27 Champion Sectors

Eligible Instruments                         Fund-based & non-fund based     Includes venture debt, debentures,

                                                                                                                          subordinated debt

Guarantee Issuance                        Manual process                                  Automated via NCGTC portal

Umbrella Guarantee                        Not earlier specified                          Covers pooled investments

                                                                                                                          (up to ?20 crore or 5% loss)

Eligible Startups & Lenders

Startups must be:

• Recognised by DPIIT
• Not classified as Non-Performing Assets (NPA)
• Certified eligible by the lending institution

Lending Institutions include:

• Scheduled Commercial Banks
• NBFCs (rated BBB+ and above, net worth ≥ ?100 crore)
• SEBI-registered Alternative Investment Funds (AIFs)

Focus on Champion Sectors

To strengthen the Make in India initiative, the reduced AGF of 1% applies to 27 Champion Sectors, which include:

• 15 Manufacturing Sectors:Aerospace &defence, automotive components, biotechnology, chemicals, petrochemicals, electronics, pharmaceuticals, etc.
• 12 Services Sectors:IT &ITeS, tourism, hospitality, medical value travel, accounting and finance, audio-visual services, among others.

Expected Outcomes

• Improved Credit Access: More financial institutions are expected to extend funding to startups due to increased guarantee coverage and reduced risk.
• Encouragement for Innovation: Easier credit access will facilitate R&D, product development, and new-age technological innovation.
• Boost to Self-Reliance: Priority manufacturing and service sectors will benefit from reduced funding costs, promoting Atmanirbhar Bharat.
• Alignment with Viksit Bharat Vision: Supports long-term goals of inclusive economic growth through entrepreneurship and job creation.