The Credit Guarantee Scheme for Startups (CGSS), notified on May 8, 2025, by the Ministry of Commerce and Industry (DPIIT), aims to provide collateral-free debt funding to DPIIT-recognized startups by offering credit guarantees for loans from Member Institutions (MIs). Superseding the 2022 notification, it became effective immediately.
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Key Features:
- Objective: Facilitate guarantee-backed loans to startups, reducing the need for collateral.
- Eligible Borrowers: DPIIT-recognized startups not in default or classified as Non-Performing Assets (NPAs).
- Eligible MIs: Scheduled Commercial Banks, Financial Institutions, RBI-registered NBFCs (BBB-rated, min. net worth Rs. 100 crore), and SEBI-registered AIFs.
- Guarantee Types:
- Transaction-based: Covers up to 85% (loans ≤ Rs. 10 crore) or 75% (loans > Rs. 10 crore), max Rs. 20 crore per borrower.
- Umbrella-based: Covers up to 5% of Pooled Investment in Startups or actual losses, max Rs. 20 crore per borrower.
- Fee Structure:
- Transaction-based: Annual Guarantee Fee (AGF) of 2% (1.5% for Northeast/women entrepreneurs, 1% for Champion Sectors).
- Umbrella-based: Annual Commitment Charge (ACC) of 0.15%, plus 1% at claim invocation or 0.25% at closure.
- Claim Process: Claims can be invoked post a 12-month lock-in period, after initiating recovery proceedings (e.g., IBC, SARFAESI). Transaction-based claims pay 75% initially, 25% post-recovery; umbrella-based claims pay 100% as final.
- Management: Overseen by a Management Committee (MC) chaired by DPIIT Secretary, with a Risk Evaluation Committee (REC) for risk assessment.
- Champion Sectors: 27 sectors under “Make in India” (e.g., Aerospace, IT, Pharma) receive concessional fees.
Purpose: Enhance debt availability for startups, promote innovation, and support economic growth through risk mitigation for lenders.