In a significant move to bolster the entrepreneurial landscape in India, the Ministry of Commerce and Industry has recently announced the expansion of the Credit Guarantee Scheme for Startups (CGSS). This initiative is designed to enhance capital mobilization for startups, thereby fostering innovation and self-reliance in the nation’s economy. The modifications to the scheme aim to provide startups with greater financial support, enabling them to thrive in a competitive environment.
As of May 9, 2025, the ceiling on the guarantee cover per borrower under the CGSS has been increased from Rs. 10 crore to Rs. 20 crore. This enhancement allows for a more substantial financial backing for startups, empowering them to undertake ambitious projects without the burden of excessive debt. Furthermore, the extent of guarantee cover provided has also been adjusted; it now offers 85% coverage for amounts in default for loans up to Rs. 10 crore, and 75% for loans exceeding that threshold. This change is expected to significantly reduce the perceived risks associated with lending to startups, encouraging more financial institutions to participate in supporting these innovative ventures.
In addition to increasing the guarantee cover, the annual guarantee fee (AGF) for startups operating in 27 Champion Sectors has been reduced from 2% to a mere 1% per annum. This strategic decision aims to make funding more attractive, particularly for sectors identified under the ‘Make in India’ initiative, which seeks to enhance the nation’s manufacturing and service capabilities. The reduction in AGF is anticipated to stimulate innovation and growth within these sectors, providing a robust framework for startups to flourish.
Aligning with Prime Minister Shri Narendra Modi’s vision of transforming India into an innovation-driven, self-reliant economy, these enhancements to the CGSS are poised to address the critical financing needs of startups. By amplifying the support and coverage available, the government is not only encouraging financial institutions to extend credit but also creating an environment conducive to research and development (R&D) and technological advancement.
The expanded scheme incorporates various operational reforms and enabling measures, which were identified through extensive consultations with stakeholders in the startup ecosystem. These reforms are aimed at making the scheme more appealing to both lenders and startups seeking financial assistance. The government’s proactive approach is expected to attract a broader range of startups, ultimately propelling the country towards its goal of becoming a Viksit Bharat (Developed India).
This initiative is a pivotal component of the Startup India initiative, which was launched alongside an Action Plan for Startups on January 16, 2016. The CGSS, originally approved and notified on October 6, 2022, was designed to provide collateral-free debt funding through various financial instruments. With the enhancements introduced in 2025, the government reiterates its commitment to catalyzing entrepreneurship and fostering a vibrant startup ecosystem in India.
In conclusion, the expansion of the Credit Guarantee Scheme for Startups marks a significant advancement in the government’s efforts to support innovation and entrepreneurship. By reducing financial barriers and increasing access to funding, this initiative is set to empower startups, drive economic growth, and contribute to the overall prosperity of the nation.