The Indian government has revised its Credit Guarantee Scheme for Startups, increasing the guarantee cover per borrower from Rs 10 crore to Rs 20 crore. The scheme aims to support research and development and encourage innovation by providing collateral-free debt funding. The updated guidelines enhance financial institutions’ lending confidence, boosting startup growth.
The Indian government has given a fresh boost to startup funding with a revamped credit guarantee scheme. Announced on Thursday, the updated Credit Guarantee Scheme for Startups (CGSS) has raised the borrowing ceiling for startups from Rs 10 crore to Rs 20 crore. This move is aimed at enhancing financial support for research and development, a crucial factor for fostering innovation in the country.
In a bid to mitigate the risks associated with lending, the CGSS is designed to provide financial backing for eligible startups. The support will especially target those working on pioneering technologies and solutions. According to the official statement, the expanded scheme will ensure that financial institutions can lend more confidently to these fledgling businesses.
Specifically, loan guarantees have been increased to 85% for amounts up to Rs 10 crore, while loans exceeding this bracket will now receive 75% coverage. Clearly, the objective is to facilitate collateral-free debt funding, which is a huge hurdle for many startups trying to secure financing.
The government first introduced the Startup India initiative, which included this action plan, back in 2016, aiming to craft a vibrant ecosystem for startups in India. The CGSS has been operational since October 2022, providing guarantees against credit instruments for promising startups through various institutions—including Scheduled Commercial Banks and Non-Banking Financial Companies.
The recent Union Budget for 2025-26 highlighted the need to enhance credit availability through a better guarantee cover, reinforcing the government’s commitment to support startups. As of January this year, over 1.61 lakh entities have been officially recognized as startups by the government. These numbers reflect a significant growth in entrepreneurial activity, showing the pressing need for accessible funding.
To summarize, the revised CGSS marks a key step in the government’s ongoing efforts to bolster startup growth by making funding more accessible. This scheme opens new avenues for startups, fueling their potential to innovate and drive the economy forward. With increased backing, the hope is that more startups can thrive and contribute to a vibrant economic landscape for India.
In essence, the Indian government’s revision of the CGSS stands to make a real impact on startup funding dynamics. By raising the guarantee ceiling, this initiative looks to foster a climate of innovation and research among new businesses while minimizing perceived lending risks. With more financial avenues opening up, India may see a further surge in entrepreneurial spirit, essential for economic progress.
Original Source: money.rediff.com