Credit Guarantee Scheme for Startups (CGSS)
Kartavya Desk Staff
Source: FE
Context: The Government has notified an expansion of the Credit Guarantee Scheme for Startups (CGSS), doubling the guarantee limit from ₹10 crore to ₹20 crore and reducing guarantee fees for startups in Champion Sectors.
About Credit Guarantee Scheme for Startups (CGSS):
• What is CGSS?
• A flagship credit guarantee initiative aimed at providing collateral-free funding support to DPIIT-recognised startups. Designed to enable term loans, working capital, venture debt, and other fund-based/non-fund-based instruments.
• A flagship credit guarantee initiative aimed at providing collateral-free funding support to DPIIT-recognised startups.
• Designed to enable term loans, working capital, venture debt, and other fund-based/non-fund-based instruments.
• Established In:
• October 2022, under the Startup India Action Plan. Operationalised by National Credit Guarantee Trustee Company (NCGTC).
• October 2022, under the Startup India Action Plan.
• Operationalised by National Credit Guarantee Trustee Company (NCGTC).
• Ministry: Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry.
• Objective and Significance:
• Lower perceived risk for lenders financing startups. Enable debt-based early-stage funding without collateral. Foster R&D, innovation, and domestic manufacturing in priority sectors. Aligns with the Viksit Bharat vision and Startup India movement.
• Lower perceived risk for lenders financing startups.
• Enable debt-based early-stage funding without collateral.
• Foster R&D, innovation, and domestic manufacturing in priority sectors.
• Aligns with the Viksit Bharat vision and Startup India movement.
• Eligibility Criteria for Startups:
• Recognised by DPIIT as per official notifications. Not classified as Non-Performing Asset (NPA) and not in default to any lender. Eligibility certified by the lending institution.
• Recognised by DPIIT as per official notifications.
• Not classified as Non-Performing Asset (NPA) and not in default to any lender.
• Eligibility certified by the lending institution.
• Eligible Lenders:
• Scheduled Commercial Banks Non-Banking Financial Companies (NBFCs) rated BBB and above with ₹100+ crore net worth SEBI-registered Alternative Investment Funds (AIFs)
• Scheduled Commercial Banks
• Non-Banking Financial Companies (NBFCs) rated BBB and above with ₹100+ crore net worth
• SEBI-registered Alternative Investment Funds (AIFs)
• Key Features of the Expanded Scheme:
• Guarantee Limit Raised: From ₹10 crore to ₹20 crore per borrower. Guarantee Coverage: 85% of amount in default for loans up to ₹10 crore. 75% for loans exceeding ₹10 crore. Annual Guarantee Fee (AGF) reduced to 1% for 27 Champion Sectors (earlier 2%). Coverage through Trustee (NCGTC) for eligible fund instruments (venture debt, subordinated debt, debentures, etc.). Operational Reforms: Streamlined process, automatic guarantee issuance via NCGTC portal. Umbrella-based Guarantee: Covers pooled investments, up to 5% of investment or ₹20 crore cap, based on actual losses.
• Guarantee Limit Raised: From ₹10 crore to ₹20 crore per borrower.
• Guarantee Coverage: 85% of amount in default for loans up to ₹10 crore. 75% for loans exceeding ₹10 crore.
• 85% of amount in default for loans up to ₹10 crore.
• 75% for loans exceeding ₹10 crore.
• Annual Guarantee Fee (AGF) reduced to 1% for 27 Champion Sectors (earlier 2%).
• Coverage through Trustee (NCGTC) for eligible fund instruments (venture debt, subordinated debt, debentures, etc.).
• Operational Reforms: Streamlined process, automatic guarantee issuance via NCGTC portal.
• Umbrella-based Guarantee: Covers pooled investments, up to 5% of investment or ₹20 crore cap, based on actual losses.