The Indian government has revised the Credit Guarantee Scheme for Startups (CGSS) to strengthen the startup ecosystem by increasing access to collateral-free loans. This strategic move aims to minimize the lending risk perceived by financial institutions, thereby encouraging greater financial support for startups focusing on research, innovation, and cutting-edge technology development.
What Is the Revised Credit Guarantee Scheme for Startups (CGSS)?
The revamped CGSS significantly increases the maximum guarantee cover per borrower from ₹10 crore to ₹20 crore. This enhanced limit is designed to make it easier for startups to secure larger financial support without the need for collateral, empowering them to scale operations, invest in R&D, and foster innovation.
Key Highlights of the Updated CGSS:
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Higher Guarantee Coverage: The scheme now offers 85% guarantee cover for loans up to ₹10 crore and 75% for loans exceeding that amount.
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Expanded Credit Options: Startups can access funding through various credit instruments including term loans, working capital, and venture debt.
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Inclusive Financial Institutions: The credit instruments are extended by Scheduled Commercial Banks, All India Financial Institutions (AIFIs), Non-Banking Financial Companies (NBFCs), and SEBI-registered Alternative Investment Funds (AIFs).
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Boost to Startup Recognition: As of January 2025, over 1.61 lakh entities have been recognized as startups under the Startup India initiative, indicating strong momentum in the entrepreneurial landscape.
Policy Background
Originally introduced on October 6, 2022, the CGSS was designed to foster innovation by offering government-backed guarantees on loans extended to startups. The Union Budget 2025–26 further reinforced this commitment by proposing expanded credit availability through enhanced guarantee coverage.
Implications for the Indian Startup Ecosystem
This revision to the CGSS is expected to:
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Encourage banks and financial institutions to lend more confidently to startups.
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Enable early-stage companies to access much-needed funds for product development, expansion, and hiring.
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Support India’s vision of becoming a global innovation and technology hub.
With reduced financial barriers, Indian startups are better positioned to compete on a global stage, develop transformative solutions, and drive job creation across sectors.