The Department for Promotion of Industry and Internal Trade (DPIIT) has stated that the Government has extended the Credit Guarantee Scheme for Startups (CGSS) to boost capital mobilisation for nascent businesses in an effort to further develop the start-up ecosystem in India.
The plan’s growth, which is consistent with the Union Budget 2025–2026 release, includes a major increase in the amount of credit available to start-ups. The changes are intended to support early-stage debt financing and foster innovation in a number of economic areas.
Through the use of tools including working capital, term loans, and venture financing, the program aims to enable debt funding without the need for collateral.
As part of the larger Startup India initiative, which was introduced by the Prime Minister on 16th January 2016, the Credit Guarantee Scheme for Startups (CGSS) was first announced on 6th October 2022. The project featured a thorough Action Plan for Startups and sought to establish a thriving start-up ecosystem in the nation.
Under the CGSS, SEBI-registered Alternative Investment Funds (AIFs), Scheduled Commercial Banks, All India Financial Institutions (AIFIs), and Non-Banking Financial Companies (NBFCs) offer guarantees against the credit instruments they extend to start-ups.
The guarantee cover cap per borrower has been raised from Rs. 10 crore (US $ 1.18 million) to Rs. 20 crore (US $ 2.36 million) due to recent changes. The level of guarantee cover has also been increased to 75 per cent for loans beyond Rs. 10 crore (US $ 1.18 million) and 85 per cent of the amount in default for loans up to Rs. 10 crore (US $ 1.18 million).
The Annual Guarantee Fee (AGF) for start-ups operating in 27 Champion areas recognised under the ‘Make in India’ initiative has been cut in half, from 2 per cent annually to 1 per cent annually, in an effort to encourage innovation in priority areas. These industries have been found to improve India’s capacity for both manufacturing and services.
Nonetheless, the scheme’s maximum guarantee coverage per borrower cannot be more than Rs. 10 crore (US $ 1.18 million). Under the same Rs. 10 crore (US $ 1.18 million) cap per borrower, real losses or up to 5 per cent of the pooled investment, whichever is less, will be protected in the case of umbrella-based guarantee protection.
It is anticipated that the CGSS expansion will increase funding accessibility and appeal to entrepreneurs, particularly those in critical industries, and will strongly encourage local manufacturing, innovation, and self-reliance.
