The Union Government has notified the expansion of the Credit Guarantee Scheme for Startups (CGSS), increasing the ceiling on guarantee cover per borrower under the Scheme from Rs 10 crore to Rs 20 crore.

Announcing the decision, the Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry said the extent of guarantee cover provided has also been increased to 85 per cent of the amount in default for loan amount up to Rs 10 crore and 75 per cent of the amount in default for loan amount exceeding Rs 10 crore.

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The Government has also announced that the Annual Guarantee Fee (AGF) for startups in 27 Champion Sectors has been reduced to 1 per cent p.a. from 2 per cent p.a.

It said that the reduction in AGF for Champion Sectors will make funding more attractive for the identified sectors and boost innovation in domestic manufacturing and self-reliance.

Notably, the Champion Sectors have been identified by the Government under ‘Make in India’ to provide a thrust to India’s manufacturing and service capabilities.

“The expanded Scheme will further reduce the perceived risks associated with lending to startups in established financial institutions, enabling greater financial flow and runway for startups to undertake research and development (R&D), experimentation, and create cutting-edge innovation and technologies,” according to the Commerce Ministry statement.

Launched with the broad objective to finance eligible startups, CGSS enables collateral-free debt funding to startups through avenues such as working capital, term loans, and venture debt.

To further catalyse entrepreneurship by providing enhanced credit support to innovators and encouraging financial institutions in the ecosystem to provide early-stage debt funds to startups, the Union Budget 2025-26 had proposed the enhancement of credit availability with guarantee cover for startups.

Several operational reforms and other enabling measures identified through consultations with the startup ecosystem have also been included in the expanded CGSS to make the Scheme attractive for lenders and startups seeking funding support.