Ministry of Commerce and Industry, The Centre’s Department for Promotion of Industry and Internal Trade (DPIIT) has announced the expansion of the Credit Guarantee Scheme for Startups (CGSS) that will increase the ceiling on guarantee cover per debtor from Rs. 10 crore to Rs. 20 crore.
The revision that increases the guarantee coverage for loans up to Rs. 10 crore, the scheme will now cover 85 per cent of the defaulted amount and for loans above Rs. 10 crore, the coverage will stand at 75 Per cent. These changes are intended at enhancing innovation-led entrepreneurship and facilitating easier access to non-dilutive venture debt for early-stage businesses.
DPIIT said the improved guarantee is expected to cheer more financial institutions to lend to startups, reducing the risk perception and driving greater fund flows to the startup ecosystem.
“Collateral-free debt is nearly a dream for startups, and this move can be a game-changer,” said Amarjeet Makhija, Partner and Leader – Startups at PwC India. “Venture debt plays a critical role in a startup's funding path. If eligibility and expenditure are made objective, CGSS can expressively empower the early-stage companies.”
With India's startup ecosystem continuing to mature, the reinforced CGSS purposes to become a crucial enabler in bridging funding gaps without forcing founders to dilute equity early in their journey.
Amit Sachdev, Co-founder and COO of M1xchange, said that this expansion will further lift up lender’s confidence by reducing risk, prompting greater participation from financial institutions in supporting MSMEs. He noted that it would encourage funding across supply chain finance, bill discounting, working capital loans, and digital trade platforms over critical areas that enable MSMEs to scale efficiently and these steps not only improve MSME flexibility and effectiveness but also fuel the momentum of the ‘Make in India’ vision, helping position India as a strong global player in manufacturing and supply chain ecosystems.
