Credit Guarantee Scheme for Startups

Indian Economy glossary

Also called: CGSS · Topic: Factors of Production, Entrepreneurship and Startups · NCERT: Beyond NCERT

Meaning

The Credit Guarantee Scheme for Startups (CGSS) is a scheme of DPIIT (Department for Promotion of Industry and Internal Trade) that began in 2022. It helps DPIIT-recognised startups get collateral-free loans, meaning loans without pledging land, gold or other property. The government gives a credit guarantee, which is a promise to the lender (a bank or other eligible financial institution) to repay part of the loss if the startup fails to repay. Startups often have ideas but few assets, and this scheme makes lenders more willing to lend to them.

In May 2025 the scheme was expanded:

  • The guarantee cap went up from ₹10 crore to ₹20 crore per borrower.
  • It covers 85% of the default on loans up to ₹10 crore, and 75% on loans above that.
  • The yearly fee fell from 2% to 1% for startups in 27 Champion Sectors.

Example

A recognised startup in Pune borrows ₹8 crore from a bank and pledges no property. It later fails to repay ₹4 crore. Because the loan is within ₹10 crore, CGSS covers 85% of that loss, which is ₹3.4 crore. The bank bears only ₹0.6 crore.

Don't confuse with

  • Fund of Funds for Startups: this gives equity (money in return for a share of ownership). SIDBI puts it into SEBI-registered AIFs (Alternative Investment Funds), not straight into startups. CGSS backs loans and gives no ownership.
  • CGTMSE: this guarantees loans to micro and small enterprises in general. CGSS is only for DPIIT-recognised startups.

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