Government Notifies Expansion of CGSS to Increase Capital Mobilisation for Startups

The Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry, has informed of expansions of the Credit Guarantee Scheme for Startups (CGSS), which increases the ceiling on guarantee cover at every borrower under the scheme between Rs. 10 crore and Rs. 20 crore.

Additionally, the Annual Guarantee Fee (AGF) has been decreased from 2% p.a. to 1% p.a. for startups in 27 Champion Sectors. In order to offer a thrust to India’s manufacturing and service capabilities, the Champion Sectors have been recognised by the government under ‘Make in India’. For the recognised sectors and to enhance innovation in domestic manufacturing and self-reliance, the decrease in AGF or Champion Sectors will make funding more appealing.

In accordance with the goal of the prime minister of India, Shri Narendra Modi, to transform India into an innovation-driven self-reliant economy, the informed expansions are aimed at fulfilling the financial requirements of these innovation-driven startups. In conclusion, the government has increased guaranteed support and coverage, government will increase several financial entities to provide loan support to these startups. Hence, the overall fund flow for these startups has increased.

The expanded Credit Guarantee Scheme for Startups (CGSS) will decrease the overall risk linked with lending to startups in setting up financial entities, helping startups get more funding and time so they can do research, try new ideas, and build advanced technologies and innovations.

The Credit Guarantee Scheme for Startups (CGSS) has been improved based on feedback from the startup community. These amendments aim to make the scheme more attractive to both lenders and startups that need funding. The goal is to boost the scheme’s impact and help more startups grow, supporting India’s journey to become a developed nation (Viksit Bharat).

The Hon’ble Prime Minister launched the Startup India initiative and its Action Plan on January 16, 2016, to build a strong startup ecosystem in the country. As part of this plan, the government introduced the CGSS on October 6, 2022. This scheme provides a guarantee on loans given to startups by banks, financial institutions, NBFCs, and SEBI-registered investment funds, up to a certain limit.

The main aim of CGSS is to help eligible startups get loans without needing to provide collateral. These loans can be in the form of working capital, term loans, or venture debt. To further promote innovation and encourage lenders to support early-stage startups, the Union Budget 2025–26 proposed increasing the amount of guaranteed credit available under the scheme.