The Indian government has made an important change to help startups. It has expanded the Credit Guarantee Scheme for Startups (CGSS). This change will make it easier for startups to get loans from banks and reduce the risk for lenders.
Why is this Important?
- India’s startup scene is growing fast. But many startups struggle to get loans. This scheme will help by:
- Giving a guarantee to banks if the startup cannot repay the loan.
- Encouraging banks to give more loans to startups.
- Helping new businesses in innovative fields like tech, manufacturing, and services.
Key Changes in the Scheme
More Guarantee Cover:
- Now, the government will guarantee up to ₹20 crore per startup (earlier it was ₹10 crore).
Loan Coverage:
- For loans up to ₹10 crore: 85% of the loan will be covered if not paid back.
- For loans above ₹10 crore: 75% will be covered.
Lower Fees for Key Sectors:
- Startups in 27 important sectors under the ‘Make in India’ plan (called “Champion Sectors”) will pay less guarantee fees—just 1% per year instead of 2%.
What Does This Mean for Startups?
- Startups will find it easier to get collateral-free loans.
- More banks and lenders will be willing to give loans to new businesses.
- It will promote new ideas, technology, and innovation in India.
- Startups in early stages or risky sectors will get more financial help.
Background of CGSS
- Launched in October 2022 by the Department for Promotion of Industry and Internal Trade (DPIIT).
- Meant to support startups by offering guarantees on loans, venture debt, and working capital.
Why This Move Matters
- Supports the Make in India and Startup India missions.
- Encourages a self-reliant and innovation-driven economy.
- Helps create a stronger and more diverse startup ecosystem.
