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Centre notifies credit guarantee scheme for startups

  • Category
    Polity & Governance
  • Published
    14th Oct, 2022

Context

The Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry has notified the credit guarantee scheme for start-ups.

About

About Credit Guarantee Scheme for Startups (CGSS):

  • This scheme would help provide the much-needed collateral-free debt funding to start-ups.
  • The scheme will act as a key enabler and risk mitigation measure for the lending institutions enabling collateral free funding to startups.
  • The scheme has been approved for the purpose of providing credit guarantees to loans extended by Member Institutions (MIs) to finance eligible borrowers.
  • Member Institutions (MIs) include financial intermediaries (banks, financial institutions, Non-Banking Financial Companies) engaged in lending/investing and conforming to the eligibility criteria approved under the Scheme.
  • The credit guarantee cover under the Scheme would be transaction based and umbrella based.
  • The exposure to individual cases would be capped at Rs. 10 crore per case or the actual outstanding credit amount, whichever is less.
  • The umbrella-based guarantee cover will provide guarantee to Venture Debt Funds (VDF) registered under Alternative Investment Funds (AIF) regulations of Securities and Exchange Board of India (SEBI).

Statistics about Start-ups in India:

  • India has become the 3rd largest start-up ecosystem in the world after the US and China.
  • India is home to as many as 75,000 Startups.
  • 49% of start-ups are from tier-2 and tier-3 cities.
  • There are currently 105 unicorns, out of which 44 were born in 2021 and 19 in 2022.
  • Startups are also emerging in the fields like IT, agriculture, aviation, education, energy, health and space sectors.
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