News Update

New startup credit guarantee programme with a $10 billion cap


The establishment of the Credit Guarantee Scheme for Startups (CGSS) was announced by union officials on Friday in order to increase the availability of collateral-free loans to startups amid tighter liquidity conditions across the country.

This is happening at a time when financing for Indian entrepreneurs has drastically decreased this year. According to some estimates, startup funding dramatically decreased from $4.6 billion in January 2022 to $885 million in August.

The ministry of commerce and industry stated in a statement that the credit score guarantee coverage under the scheme will be “transaction-based” and exposure to individual instances will be capped at 10 crores per case or the actual outstanding credit amount, whichever is less.

The amount of transaction-based cover will be 80% of the defaulted amount if the original loan sanction amount is up to Rs. 3 crores, 75% of the defaulted amount if it is above Rs. 3 crores and up to Rs. 5 crores, and 65% of the defaulted amount if it is above Rs. 5 crore (up to Rs. 10 crores per borrower), according to the ministry.

New startup credit guarantee programme with a $10 billion cap

The National Credit Guarantee Trustee Company Limited (NCGTC) may be running the scheme, it was added, along with institutional mechanisms for operationalizing the scheme. DPIIT may be forming a management committee (MC) and a risk evaluation committee (REC) for reviewing, overseeing, and operational oversight of the scheme.

“In the midst of the financial crisis, the finance itself is the biggest obstacle that a company runs up and falls short of. The adverse response from banks, which view startups as high-risk investments, and the never-ending rounds of pitches to venture capitalists or angel investors may also push back the most important decisions, according to Arham Pratap Jain, founder and CTO of Trucknetic.

According to Jain, the collateral-free credit scoring scheme is a much-needed intervention that will benefit the nation’s startup sector.CGSS may apply to loans extended by Scheduled Commercial Banks, Non-Banking Financial Companies, and Alternative Investment Funds that are registered with SEBI (AIFs).

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