ওভারভিউ

The Government of India established the Credit Guarantee Scheme for Startups with a fixed corpus for providing credit guarantees to loans extended to DPIIT recognised startups by Scheduled Commercial Banks, Non-Banking Financial Companies (NBFCs) and Venture Debt Funds (VDFs) under SEBI registered Alternative Investment Funds. The revised framework has enhanced guarantee coverage, increasing the maximum limit from ₹10 crore to ₹20 crore per eligible borrower.

 

CGSS does not provide guarantee cover to DPIIT recognised startups directly, but through a Trustee (NCGTC), which in turn provides guarantee cover to MIs who provide loans to startups. The instruments of assistance would be in the form of Venture debt, working capital, subordinated debt/mezzanine debt, debentures, optionally convertible debt and other fund-based as well as non-fund-based facilities, which have crystallised as debt obligations. Credit guarantee coverage under this model would be either transaction-based or umbrella-based.

Operational Guidelines

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খনগৎপা য়াবগী ওইবা

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:

  • Startup as recognized by DPIIT as per Gazette Notifications issued from time to time, and
  • Startup not in default to any lending/investing institution and not classified as Non-Performing Asset as per RBI guidelines, and 
  • Startup whose eligibility is certified by the member institution for the purpose of guarantee cover.
Lending/Investing Institutions

The eligibility criteria for the lending/investing institutions under the Credit Guarantee Scheme for Startups shall be as follows:

  • Scheduled Commercial Banks and Financial Institutions,
  • 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.
  • SEBI registered Alternative Investment Funds (AIFs).

Registered Member Institutions

As on September 12, 2023, there are a total of 25 registered Member Institutions (MIs). Out of this, 11 are Public Sector Banks, 7 are Private Sector Banks, 1 Foreign Bank, 1 Small Finance Bank, 1 AIF, 1 Financial Institution, and 3 NBFCs.

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রেজিস্তার তৌবগী থৌওং

 

All eligible institutions may register itself under the said scheme by submitting a signed undertaking (format given on website) and Board Resolution. Upon successful registration of the Member Institution (MI), login credentials of the MI shall be created whereafter it can apply for guarantee cover on NCGTC’s portal. To know more and register as an MI, visit the NCGTC's portal. 

A startup needs to be recognised by DPIIT for it to be able to avail the benefits under the scheme. The Scheme by way of providing guarantee cover, supports eligible Banks, NBFCs and AIFs to lend to DPIIT recognised eligible startups. Eligible startups may approach these institutions for funding requirement, who would evaluate the same in accordance with general lending protocols and scheme and other guidelines.

 

তোয়না হংবা ৱাহংশীং

1 What is the objective of CGSS and how would guarantee be issued?

The broad objective of CGSS is to provide guarantee upto a specified limit against credit instruments extended by MIs to finance eligible startups. This Scheme would help provide the much-needed collateral free debt funding to startups. In this regard, an eligible startup shall approach an MI and seek credit assistance under this guarantee scheme.

The MI shall examine the feasibility and viability of the project from various aspects and after ensuring feasibility and viability of the project and compliance with eligibility parameters of the scheme guidelines, sanction need based assistance to the startup as per its guidelines. Simultaneously, the MI shall apply on the portal of NCGTC and seek guarantee cover for the credit extended. Issue of guarantee cover under CGSS shall be automatic based on meeting of eligibility parameters, which has to be ensured by the MI.

2 What is the quantum of assistance eligible for guarantee cover under the Scheme?

The maximum amount of debt (fund-based or non-fund-based facilities) eligible for guarantee cover under the Scheme has been revised to ₹20 crore per borrower.

3 What is the extent of the guarantee cover under CGSS ?

Extent of the guarantee:

  • For transaction-based guarantee cover:

    The Trust shall provide guarantee cover, subject to a maximum of Rs. 20 crore per borrower, as per the details given below:

    • 85% of the amount in default for loan amount up to Rs. 10 crore
    • 75% of the amount in default for loan amount exceeding Rs. 10 crore
  • For umbrella-based guarantee cover:

    The Trust shall provide guarantee cover of actual losses or up to a maximum of 5% of Pooled Investment on which cover is being taken from the fund in Startups, whichever is lower, subject to a maximum of Rs. 20 crore per borrower.

    Losses are defined as aggregate of principal investments of written off assets along with three months accrued interest from the date of default. In case of partially written off assets, only the principal portion written off along with three months accrued interest thereon from the date of default will be accounted for the loss assets.

    The umbrella-based guarantee cover will run through the life of the venture debt fund.


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