Govt Approves Revised Credit Guarantee Scheme For Startups

On Thursday, the government approved an updated Credit Guarantee Scheme for Startups (CGSS), which now offers a maximum guarantee cover of Rs 20 crore per borrower, double the previous amount.

The main goal of CGSS is to provide a guarantee for loans given to eligible startups by member institutions.

This scheme will help startups access collateral-free funding, according to the Department for Promotion of Industry and Internal Trade (DPIIT).

The new notification replaces the previous one from October 6, 2022, and takes effect from May 8.

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The scheme aims to make it easier for startups to get collateral-free loans from banks, NBFCs, AIFs, and other registered financial entities.

The guarantee cover has been increased to 85% of the loan amount in default for loans up to INR 10 crore and 75% for loans over INR 10 crore.
Additionally, the annual guarantee fee (AGF) for startups in 27 key sectors has been reduced to 1% from 2%.

These changes follow the announcements in the Union Budget 2025-26 and designed to encourage financial institutions to provide early-stage loans while supporting innovation and entrepreneurship.

The updated CGSS is part of the government's ongoing efforts to increase startup funding in India. When the scheme was first introduced in October 2022, the focus was on offering collateral-free loans as an alternative to equity-heavy funding, especially after venture capital funding dropped following the 2021 funding boom.

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