• Credit Guarantee Scheme for Startups (CGSS)

    Getting a startup off the ground is not an easy task for any entrepreneur. Lack of adequate funding when required, and the high risk perception of the banks towards this segment, has most often been the two major reasons why startups have found it so difficult to even set up shop.

    The Government of India, to give a much-needed boost to the startup industry, has recently announced a special scheme, known as the Credit Guarantee Scheme for Startups or Credit Guarantee Fund Scheme or CGSS. An offshoot of the Startup India plan launched by the Prime Minister, this scheme, with a contribution of Rs.2000 crore, will enable startups to obtain collateral-free loans for starting business.

    Read on below to know more about what this scheme is about, what it promises to provide, and how it is likely to benefit different categories of eligible business owners across India.

    Highlights of Credit Guarantee Scheme for Startups (CGSS)

    • The guarantee will be offered by lending institutions, that are members in this scheme, to eligible startups that must be Department of Industrial Policy and Promotion (DIPP) recognised.
    • CGSS will offer guarantees based on portfolios wherein every included portfolio will consist of 10 or more startup loans for a financial year.
    • Credit guarantees of up to Rs.5 crore will be offered to every eligible case, including assistance, such as working capital, venture capital, optionally convertible debt, debentures, term loan, etc.
    • This scheme will be offered to provide credit of up to 75% credit, subject to a limit of Rs.150 lakh.
    • Micro enterprises seeking loans of below Rs.5 lakh will be offered up to 85% of the requested credit amount.
    • Up to 80% credit will be extended to MSME’s operated or owned by women and NER (including Sikkim).
    • A guarantee cover of up to 50% of the amount, subject to a limit of Rs.50 lakh, will be offered for MSME retail trade.

    Pre-requisites of CGSS

    • For KYC, Aadhaar will be compulsory for all resident partners or directors, while the passport number will be mandatory for non-resident partners or directors.
    • The lending institutions that are members under this scheme may be Alternate Investment Funds (AIFs), or scheduled commercial banks/financial institutions or NDFCs registered witth the RBI.
    • CGSS will function as per the terms of the trusteeship management of the National Credit Guarantee Trust Company (NCGTC).
    • Member lending institutions will offer guarantee amounts of up to Rs.500 lakh to eligible startups, without requiring a third party guarantee or security.
    • This Credit Guarantee Scheme for MSME will be monitored and supervised by a Management Committee (MS).
    • Conflicts of interest will be addressed and taken up by the Risk Evaluation Committee (REC) to be formed for this purpose.

    Eligible Lending Institutions under CGSS

    • Scheduled commercial banks - Public sector banks, private sector banks, foreign banks.
    • Certain Regional Rural Banks categorized as ‘Sustainable Viable' by NABARD

    Certain other financial institutions deemed as chosen by the Govt. of India as per set criteria. These include:

    • Small Industries Development Bank of India (SIDBI)
    • Delhi Financial Corporation
    • North Eastern Development Finance Corporation (NEDFI)
    • Kerala Financial Corporation
    • National Small Industries Corporation (NSIC)
    • Jammu & Kashmir Development Finance Corporation Ltd
    • Tamil Nadu Industrial Investment Corporation Ltd.
    • Export Import Bank of India
    • Andhra Pradesh State Financial Corporation

    Guarantee Fee under CGSS

    • Composite Annual Guarantee Fee, of 1.0 % p.a. of credit amount provided, will be charged .
    • Under this, a Guarantee Fee of 0.75% will be charged for credit amounts of up to Rs.5 lakh, and 0.85% for credit amounts over Rs.5 lakh and below Rs.100 lakh, will be charged from women-owned enterprises, micro enterprises and NER units (including Sikkim).

    Guarantee Period under CGSS

    Under CGSS, the guarantee cover will be provided for the period agreed upon for the credit facility. For working capital, guarantee cover is provided for a block of 5 years.


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