Govt Doubles Credit Limit Under Credit Guarantee Scheme! Check Here

In a significant push to energise India’s innovation-first economy, the government has announced a game-changing move aimed squarely at easing the funding worries of early-stage and scaling startups. The Department for Promotion of Industry and Internal Trade (DPIIT), operating under the Ministry of Commerce and Industry, has rolled out a massive upgrade to the Credit Guarantee Scheme for Startups (CGSS)—and this update could potentially redefine how startups access capital in India.

At the heart of this upgrade lies a simple but powerful change: the maximum credit guarantee cover per startup borrower has been doubled—from ₹10 crore to ₹20 crore. For a founder sitting on a promising business model but dreading the daunting capital risk or dilution, this is nothing short of a breakthrough.

What’s New and Why It Matters

The newly revised scheme isn’t just about higher limits—it’s also about deeper trust. Startups borrowing up to ₹10 crore will now enjoy an 85% guarantee cover, while those borrowing beyond that amount will receive 75% coverage. Until now, the scheme offered a flat 75% guarantee across all loans, irrespective of the size.

This new differential model acknowledges that early-stage companies often struggle to build traditional forms of security or collateral. By absorbing a higher risk share, the government is attempting to ease lender hesitation and increase the overall volume of startup credit.

But there's more: for startups in 27 identified ‘Champion Sectors’, the government has halved the Annual Guarantee Fee (AGF) from 2% to just 1%. These sectors—flagged under the 'Make in India' initiative—span high-potential verticals within manufacturing and services, all critical to India's journey toward economic self-reliance and global competitiveness.

“To boost domestic manufacturing and Aatmanirbharta, 27 Champion Sectors under Make in India will benefit from a reduced annual guarantee fee. This step aims to promote R&D, innovation, and further energise India’s entrepreneurial spirit,” said Piyush Goyal, Union Minister for Commerce and Industry.

In India’s vibrant but often volatile startup environment, access to capital has long remained a challenge—especially when it comes to venture debt or collateral-free loans. Most early-stage founders rely on equity-based capital that dilutes ownership or angel networks that aren’t scalable. The CGSS tries to bridge that very gap by making credit-based funding more accessible.

Launched in October 2022, CGSS is unique in its model. It offers government-backed credit guarantees through a wide spectrum of financial institutions—including Scheduled Commercial Banks, All India Financial Institutions (AIFIs), NBFCs, and even SEBI-registered Alternative Investment Funds (AIFs). Startups can access term loans, working capital, or venture debt—all without needing to mortgage their future.

“Venture debt has become an important element of a startup’s funding journey. Collateral-free debt is almost like a dream for startups and helps them to meet initial funding needs without diluting very quickly. CGSS could help many startups—if the eligibility and process of disbursement are objective,” says Amarjeet Makhija, Partner and Startup Leader at PwC India.

Ecosystem Voices and Reactions: A Welcome Shift

Industry insiders and startup founders have been advocating for more inclusive, flexible, and risk-tolerant funding mechanisms. This latest reform is the result of widespread stakeholder consultations and reflects the growing maturity of the Indian startup policy framework.

Importantly, the announcement follows the Union Budget 2025–26, which included a clear intent to enhance credit availability with government-backed guarantees for startups. It reflects a consistent policy direction—from the inception of Startup India in 2016 to this current shift—toward building a sustainable, innovation-led, and globally competitive startup ecosystem.

For many founders, especially those outside metros, this could mean the difference between shutting down prematurely and scaling up confidently.

Champion Sectors: The Engine for ‘Viksit Bharat’

So, who stands to benefit the most?

The government has identified 27 'Champion Sectors' where it wants to see accelerated innovation and global leadership. These include areas such as electronics manufacturing, food processing, renewable energy, defence production, biotechnology, and several IT-enabled service verticals. Lowering the AGF to 1% makes borrowing in these sectors significantly more cost-effective, giving entrepreneurs in high-capital domains a much-needed breather.

“The expansion aligns with Prime Minister Narendra Modi’s vision of transforming India into a self-reliant, innovation-led economy,” the Ministry stated, highlighting the CGSS upgrade as a catalyst for improved R&D, risk-taking, and product innovation.

The Road Ahead: A More Inclusive Financial Ecosystem?

While the update is promising, experts caution that its impact will depend heavily on on-ground execution. Timely disbursement, transparent processes, and proactive lender engagement will be key to making this scheme truly transformative.

If implemented well, CGSS could become the cornerstone of India’s startup credit ecosystem, offering founders across the country—not just those in VC-rich cities—a level playing field. It could also inspire confidence among banks and NBFCs, nudging them to actively lend to startups without worrying about defaults eating into their books.

The expansion of the Credit Guarantee Scheme is more than a financial reform—it is a signal of intent. At a time when the world is watching India's startup engine roar, the government is showing that it's not just cheering from the sidelines but actively fueling the next wave of innovation.

For India's ambitious, daring, and mission-driven founders, this could be the shot in the arm they’ve been waiting for.