Government Expands Credit Guarantee Scheme for Startups (CGSS), Increases Loan Cap to ₹20 Crore

Government Expands Credit Guarantee Scheme for Startups (CGSS), Increases Loan Cap to ₹20 Crore

In a significant policy boost for India’s startup ecosystem, the Government of India has officially expanded the Credit Guarantee Scheme for Startups (CGSS), doubling the guarantee limit and lowering annual fees to enhance credit access and foster innovation.

Strengthening Startup Financing

Originally launched on October 6, 2022, CGSS was designed to offer collateral-free debt funding to eligible startups through Scheduled Commercial Banks, All India Financial Institutions (AIFIs), Non-Banking Financial Companies (NBFCs), and SEBI-registered Alternative Investment Funds (AIFs). The scheme complements the broader Startup India initiative, which was inaugurated by Prime Minister Narendra Modi on January 16, 2016, with the goal of nurturing a dynamic startup environment across India.

By removing the need for collateral, CGSS aims to unlock credit lines for early-stage startups, enabling them to secure term loans, working capital, and venture debt—critical components of growth and sustainability.

Key Enhancements in the Revised CGSS

As per the latest notification from the Department for Promotion of Industry and Internal Trade (DPIIT) under the Ministry of Commerce and Industry, the scheme has been upgraded to align with the Union Budget 2025–26. Major updates include:

• Higher Guarantee Limit: Increased from ₹10 crore to ₹20 crore per eligible borrower.

• Expanded Guarantee Coverage:

  • 85% coverage for loans up to ₹10 crore.

  • 75% coverage for loans above ₹10 crore.

• Reduced Annual Guarantee Fee (AGF):

  • For startups in 27 ‘Champion Sectors’ under the Make in India mission, the AGF has been lowered from 2% to 1% per annum.

These changes are expected to make debt funding more accessible and cost-effective, particularly for startups operating in priority sectors vital to India's manufacturing and services growth.

Encouraging Innovation While Reducing Lending Risk

By enhancing the guarantee coverage, the government aims to reduce the perceived risk for lenders, encouraging them to finance startups working in high-risk, high-reward areas such as R&D, emerging tech, and innovative business models. This strategic shift is designed to allow startups to extend their financial runway, invest confidently in growth, and scale without over-relying on equity dilution.

Ecosystem Reforms to Expand Reach

Beyond financial upgrades, the government has introduced operational and procedural improvements to simplify the scheme’s implementation. These adjustments—shaped through ongoing stakeholder feedback—aim to make CGSS more practical for both borrowers and lenders, particularly startups in Tier 2 and Tier 3 cities.

By minimizing red tape, the reforms support the scheme’s broader mission: democratizing access to institutional credit and supporting innovation across geographies.

Driving Towards a Viksit Bharat

The CGSS expansion is closely tied to the government’s vision of building a Viksit Bharat (Developed India) powered by self-reliance and innovation. By removing funding roadblocks and offering stronger credit guarantees, the revised scheme sets the stage for startups to become key contributors to economic growth, job creation, and global competitiveness.

As more financial institutions onboard and trust in the scheme grows, CGSS is poised to drive the next phase of India's startup revolution.