DPIIT Expands Credit Guarantee Scheme for Startups to Bolster Innovation and Self-Reliance

In a landmark move to strengthen India's startup ecosystem, the Department for Promotion of Industry and Internal Trade (DPIIT), under the Ministry of Commerce and Industry, has announced significant enhancements to the Credit Guarantee Scheme for Startups (CGSS). The revamped scheme is aimed at addressing the funding challenges faced by innovative startups and aligns closely with the vision of Prime Minister Shri Narendra Modi to transform India into an innovation-driven, self-reliant economy.

Increased Guarantee Cover and Higher Loan Limits

One of the key highlights of the expansion is the substantial increase in the guarantee cover ceiling per borrower, which has now been doubled from ₹10 crore to ₹20 crore. This move will offer startups greater financial headroom, enabling them to scale operations, undertake larger projects, and invest in advanced research and development initiatives.

Additionally, the extent of guarantee cover provided under the scheme has been made more robust. For loans up to ₹10 crore, the guarantee cover has been increased to 85% of the amount in default, up from earlier provisions. For loans exceeding ₹10 crore, the coverage now stands at 75%. This enhanced guarantee support aims to reduce the risk perception among lenders and encourage greater participation from financial institutions.

Annual Guarantee Fee Reduction for Champion Sectors

In a move to incentivize innovation in high-potential industries, the Annual Guarantee Fee (AGF) for startups operating in 27 Champion Sectors has been slashed from 2% per annum to just 1% per annum. These sectors, identified under the Government’s flagship ‘Make in India’ initiative, include areas of strategic importance in both manufacturing and services.

The reduction in AGF is designed to make credit more affordable and accessible for startups in these sectors, promoting domestic manufacturing and strengthening India’s technological capabilities. This reform is expected to stimulate increased entrepreneurial activity in sectors vital for India’s global competitiveness.

Broader Impact on the Startup Ecosystem

The revamped CGSS is poised to significantly impact the startup funding landscape in India. By increasing the guarantee cover and decreasing the AGF, the scheme effectively lowers the entry barriers for startups seeking debt funding. It also incentivizes scheduled commercial banks, All India Financial Institutions (AIFIs), Non-Banking Financial Companies (NBFCs), and SEBI-registered Alternative Investment Funds (AIFs) to lend more confidently to early-stage ventures.

The increased fund flow is expected to enable startups to pursue bold ideas, invest in product development, and drive innovation without the burden of providing collateral. Startups engaged in frontier technologies, green innovation, and deep tech sectors stand to gain considerably from the enhanced financial support.

Operational Reforms for Ease of Access

In response to stakeholder feedback, the DPIIT has also introduced several operational reforms and enabling measures in the expanded scheme. These reforms are intended to simplify application processes, reduce bureaucratic hurdles, and ensure quicker turnaround times for credit approvals. The scheme's design now reflects a startup-friendly approach developed in consultation with ecosystem stakeholders, ensuring it remains responsive and relevant to the evolving needs of young enterprises.

These improvements are expected to enhance the Scheme’s attractiveness not just for startups but also for lending institutions, contributing to a more dynamic and responsive startup funding ecosystem.

Background and Future Outlook

The CGSS was initially approved and notified by the Government of India on 6th October 2022, as part of the broader Startup India Action Plan, launched by the Prime Minister on 16th January 2016. The objective of CGSS has been to provide credit guarantees against instruments like working capital loans, term loans, and venture debt offered to eligible startups.

The recent changes follow proposals made in the Union Budget 2025–26, which emphasized enhanced credit availability and support mechanisms to catalyze entrepreneurship. With this expansion, the CGSS is expected to play a pivotal role in empowering startups, especially in emerging technology domains, while reducing the systemic hesitation financial institutions often have when lending to early-stage enterprises.

Accessing the Scheme

Startups and lending institutions can access the detailed notification and application guidelines for the expanded CGSS on the official website of the National Credit Guarantee Trustee Company (NCGTC) at https://www.ncgtc.in/en/product-details/CGSS/Credit-Guarantee-Scheme-for-Start-ups-(CGSS).

By reinforcing the safety net for lenders and encouraging broader financial participation, the Government is fostering an enabling environment where Indian startups can thrive, innovate, and lead the way towards a ‘Viksit Bharat’—a developed and self-sufficient India.