New Delhi, Oct 7: The Commerce Ministry has notified the setting up of the Credit Guarantee Scheme for Startups (CGSS), aimed at providing credit guarantees to loans extended by scheduled commercial banks, non-banking financial companies (NBFCs) and Securities and Exchange Board of India (SEBI) registered Alternative Investment Funds (AIFs).
CGSS will provide credit guarantees up to a specified limit against loans extended by Member Institutions (MIs) to finance eligible borrowers, i.e startups.
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. Under transaction-based guarantee cover, the guarantee cover is obtained by the MIs on a single eligible borrower basis.
Transaction-based guarantees will promote lending by banks and NBFCs to eligible startups. The extent of transaction-based cover will be 80 per cent of the amount in default if the original loan sanction amount is up to Rs 3 crore, 75 per cent of the amount in default if the original loan sanction amount is above Rs 3 crore, and up to Rs 5 crore, and 65 per cent of the amount in default if the original loan sanction amount is above Rs 5 crore (up to Rs 10 crore per borrower).
The umbrella-based guarantee cover will provide a guarantee to Venture Debt Funds (VDF) registered under AIF regulations of SEBI (a growing segment of funding in the Indian startup ecosystem), in view of the nature of funds raised by them and debt funding provided by them.