Govt. notifies Credit Guarantee Scheme for Startups (CGSS)
The Central Government has approved the ‘Credit Guarantee Scheme for Startups (CGSS)’ for the purpose of providing credit guarantees to loans extended by Member Institutions (MI) to finance eligible borrowers being Startups.
The Scheme has come into force from 08.05.2025 and shall cover loan/Debt facilities sanctioned to an eligible borrower on or after 08.05.2025.
Eligible borrower The eligibility criteria for an entity to borrow under the Credit Guarantee Scheme for Startups shall be as follows, wherein an entity should be:
i. Startup as recognized by DPIIT as per Gazette Notifications issued from time to time, and
ii. Startup not in default to any lending/investing institution and not classified as Non-Performing Asset as per RBI guidelines, and
iii. Startup whose eligibility is certified by the Member Institution for the purpose of guarantee cover.
Eligible lending/investing institutions The eligibility criteria for the lending/investing institutions under the Credit Guarantee Scheme for Startups shall be as follows:
i. Scheduled Commercial Banks and Financial Institutions,
ii. RBI registered Non-Banking Financial Companies (NBFCs) having a rating of BBB and above as rated by external credit rating agencies accredited by RBI and having minimum networth of Rs. 100 crore. However, it may be noted that in case an NBFC subsequently becomes ineligible, due to a downgrade in the credit rating below BBB, the NBFC shall not be eligible for further guarantee cover till upgradation again to eligible category.
iii. SEBI registered Alternative Investment Funds (AIFs).
Agreement/undertaking to be executed/furnished by the lending/investing institution A lending/investing institution shall not be entitled to a guarantee in respect of eligible loan/ venture debt facilities granted by it unless it has entered into an agreement with Trustee/submitted an undertaking to the Trustee in such form as may be required by the Trustee.
Responsibilities of Member Institution under the Scheme The responsibilities of Member Institution (MI) under the scheme are as follows:
i. The MI shall evaluate credit applications by using prudent banking judgement and shall use their business discretion / due diligence in selecting commercially viable proposals and conduct the account(s) of the borrowers with normal banking prudence.
ii. The MI shall closely monitor the borrower account.
iii. The MI shall safeguard the primary securities taken from the borrower in respect of the credit facility in good and enforceable condition.
iv. The MI shall ensure that the guarantee claim in respect of the credit facility and borrower is lodged with the Trust in the form and in the manner and within such time as may be specified by the Trust in this behalf and that there shall not be any delay on its part to notify the default in the borrowers account which shall result in the Trust facing higher guarantee claims.
v. The payment of guarantee claim by the Trust to the MI does not in any way take away the responsibility of the lending/investing institution to recover the entire outstanding amount of the credit from the borrower. The MI shall exercise all the necessary precautions and maintain its recourse to the borrower for entire amount of credit facility owed by it and initiate such necessary actions for recovery of the outstanding amount, including such action as may be advised by the Trust/Trustee.
vi. The MI shall comply with such directions as may be issued by the Trust/Trustee, from time to time, for facilitating recoveries in the guaranteed account, or safeguarding its interest as a guarantor, as the Trust/Trustee may deem fit and the MI shall be bound to comply with such directions. vii. The MI shall, in respect of any guaranteed account, exercise the same diligence in recovering the dues, and safeguarding the interest of the Trust in all the ways open to it as it might have exercised in the normal course if no guarantee had been furnished by the Trust. The MI shall, in particular, refrain from any act of omission or commission, either before or subsequent to invocation of guarantee, which may adversely affect the interest of the Trust as the guarantor. In particular, the MI should intimate the Trust/Trustee while entering into any compromise or arrangement, which may have effect of discharge or waiver of personal guarantee(s) or security. The MI shall also ensure either through a stipulation in an agreement with the borrower or otherwise, that it shall not create any charge on the security held in the account covered by the guarantee for the benefit of any account not covered by the guarantee, with itself or in favour of any other creditor(s) without intimating the Trust. Further the MI shall secure for the Trust/Trustee or its appointed agency, through a stipulation in an agreement with the borrower or otherwise, the right to list the defaulted borrowers’ names and particulars on the Website of the Trust/Trustee.
Guarantee Fee
For transaction based guarantee – For availing the guarantee cover, the Member Institution shall pay Annual Guarantee Fee (AGF) of 2% p.a. of the disbursement/outstanding amount (on sanction amount, in case of working capital facility and non-fund based facility) as on the date of application of guarantee cover, upfront to the Trust within 30 days from the date of Credit Guarantee Demand Advice Note (CGDAN) of guarantee fee. Relaxation in rates have been given for units from the North East region, women entrepreneurs and units from the 27 champion sectors.
Umbrella-based guarantee cover – For availing the guarantee cover, the Member Institution shall pay Guarantee Fee in the form of Annual Commitment Charge.
Ceiling on guarantee cover – Maximum guarantee cover per borrower shall not exceed Rs. 20 crore.
Download Credit Guarantee Scheme for Startups Notification >>
- CBDT issues awareness material on making a rightful claim of refunds in ITR
- No infirmity in reopening on the ground that no ITR filed when assessee had two PANs
- Electric Vehicle purchased outside Uttar Pradesh not eligible for tax exemption
- Under Section 75(4) of GST Act, opportunity of personal hearing must even if not asked
- ICAI issues revised Schedule of CA May 2025 exams after postponement
){kind=link}