Stand-Up India Scheme

Indian Economy glossary

Also called: Stand-Up India, Stand Up India · Topic: Rural Credit, Microfinance and Financial Inclusion · NCERT: Beyond NCERT

Meaning

The Stand-Up India Scheme is a Ministry of Finance scheme, launched on 5 April 2016. It helps Women, SC and ST entrepreneurs get bank loans of above Rs 10 lakh and up to Rs 1 crore to start a greenfield (brand-new) enterprise. The bank lends up to 85% of the project cost, and a credit guarantee covers 85% of the loan amount.

It matters because first-time borrowers from these groups usually have little collateral and no credit history, so banks hesitate to give them large loans. The scheme uses a guarantee to make these loans safer for banks. It sits where financial inclusion, social justice and MSME credit meet.

Explanation

How the loan works

Who can borrow: Women, SC and ST entrepreneurs. OBCs and minorities are not named categories.
What kind of business: greenfield only. This means a business started from scratch, not the expansion of a business that already exists.
Eligible sectors: manufacturing, services, trading and agri-allied activities (farm-linked work such as dairy or fisheries).
Loan size: above Rs 10 lakh, up to Rs 1 crore.
Loan form: a composite loan (one loan covering both a term loan and working capital) or a term loan alone.
Term loan: money for fixed assets such as machines or a shed, repaid over several years.
Working capital: money for day-to-day costs such as raw materials and wages.
Who lends: all branches of Scheduled Commercial Banks.
How to apply: at a bank branch or on the Stand-Up Mitra portal (standupmitra.in).

The credit guarantee: the core of the design

A credit guarantee is a promise by a guarantor to repay the lender if the borrower defaults (fails to repay). It does the job that collateral would normally do.
Under Stand-Up India:
the guarantee covers 85% of the loan amount;
the guarantee fee is 0.50%;
the guarantee is paid from a Credit Guarantee Corpus of Rs 4,111 crore. A corpus is a fund set aside in advance to pay claims.
The chain of logic:
the guarantee covers most of the bank's possible loss →
so the bank takes less risk on a borrower with no collateral →
so the bank is more willing to lend.
Why a corpus is cheap for the government: the government does not pay the full loan amount. It pays only when loans go bad. A fixed fund can therefore back a much bigger pool of lending. Its real cost depends on how many loans default.

Worked example: the two "85%" figures

Take a project costing Rs 50 lakh.

Maximum loan = 85% of project cost = Rs 42.5 lakh.
Margin money (the owner's own share of the cost) = 15% = Rs 7.5 lakh, which the borrower must bring in.
Guarantee cover = 85% of the loan = 85% × 42.5 lakh ≈ Rs 36.1 lakh.
The bank's own risk if the loan fails completely ≈ 42.5 − 36.1 = about Rs 6.4 lakh.
Guarantee fee = 0.50% × 42.5 lakh ≈ Rs 21,250.

What makes lending under it rise or fall

Rises with: the branch-level norm, under which each branch is expected to give at least one loan to an SC or ST borrower and at least one to a woman; certainty that guarantee cover will continue; and awareness and handholding through Stand-Up Mitra.
Falls with: low awareness, weak support after the loan is sanctioned, reluctance at branch level, the 15% margin-money burden, and gaps or doubt about the scheme's term.

In India

Nodal ministry: Ministry of Finance (Department of Financial Services), not the Ministry of MSME or DPIIT.
Legal basis: none. It is an executive scheme, not created by an Act. It helps carry out Article 46 (DPSP), under which the State must promote the economic interests of SCs, STs and weaker sections.
Term: the earlier term ran up to 2025. In 2026 the scheme was continued for 5 years, up to 31.03.2031, with a target of 2.5 lakh more entrepreneurs.
Progress over time:
Rs 14,431.14 crore sanctioned by 31 October 2018.
Rs 40,710 crore sanctioned to 1,80,636 accounts by 21 March 2023, an average of about Rs 22.5 lakh per loan.
More than 2.75 lakh Women/SC/ST entrepreneurs given loans since April 2016.
Who actually gets the loans (as on 27 January 2025):
Women: 1,94,804 (about three loans in four).
SC: 49,031.
ST: 15,962 (only about 6%).
SC and ST share a single slot in the branch norm, so a branch can meet the norm without ever lending to an ST borrower.
Related systems:
It is part of the wider push under priority sector lending, where weaker sections have a 12% target (verify current).
It follows other guarantee schemes such as CGTMSE (2000) and CGFMU (2015).
Budget 2025-26 announced a separate scheme of term loans up to Rs 2 crore for 5 lakh first-time women, SC and ST entrepreneurs.
Oversight: the Standing Committee on Finance examined the scheme in its 32nd Report on Demands for Grants 2026-27.

Don't confuse with

Startup India: launched in the same year, but led by DPIIT. It funds innovation, whatever the founder's social group. Stand-Up India is about who the borrower is (Women/SC/ST) and is run by the Ministry of Finance.
PM Mudra Yojana: covers micro-loans up to Rs 10 lakh. Stand-Up India starts above Rs 10 lakh.
Budget 2025-26 first-time entrepreneurs scheme: offers term loans up to Rs 2 crore for 5 lakh beneficiaries. Stand-Up India's ceiling is Rs 1 crore.
85% of project cost vs 85% of loan amount: the first is the maximum loan. The second is the guarantee cover.

Prelims Hooks

Launched on 5 April 2016. Nodal ministry: Ministry of Finance, not MSME.
Beneficiaries: Women, SC and ST only. OBCs and minorities are not named categories.
Loan band: above Rs 10 lakh to Rs 1 crore, for greenfield units only. Expanding an existing business (brownfield) is not eligible.
Loan up to 85% of project cost. Guarantee covers 85% of the loan at a 0.50% fee, from a Rs 4,111 crore corpus.
Eligible sectors include trading and agri-allied activities, not just manufacturing. All Scheduled Commercial Bank branches can lend, and the portal is Stand-Up Mitra.
Continued up to 31.03.2031, with a target of 2.5 lakh more entrepreneurs. More than 2.75 lakh have been given loans since 2016.

Mains Points

Guarantee vs moral hazard: an 85% guarantee makes banks willing to lend without collateral. But with most of the loss covered, a bank may check projects less carefully and follow up less when a business struggles, then simply claim the guarantee. Moral hazard means taking less care because someone else bears most of the loss. Public data reports loans sanctioned, not NPAs or claims paid. So no one can yet judge whether Rs 4,111 crore and a 0.50% fee are enough.
Depth vs reach, and who is left out:
These are big loans, about Rs 22.5 lakh on average, so borrowers will always be fewer than under Mudra.
Women have gained the most, with about Rs 33,152 crore.
ST borrowers are only about 6%, because of the shared SC/ST branch slot. That gap comes from the design, not the loan size.
The 15% margin money and the greenfield-only rule shut out poorer borrowers and Mudra borrowers who have repaid and want to grow.
Reforms for an answer:
Separate SC and ST targets, set by district.
Yearly reporting of NPAs and how many units survive, examined by the Standing Committee on Finance.
Clear lanes and one shared borrower database, so this scheme and the Rs 2 crore Budget 2025-26 scheme do not count the same borrower twice.
Links to buyers through the National SC-ST Hub, so a new unit has a market as well as a loan.

Rural Credit, Microfinance and Financial Inclusion