Expansion of Credit Guarantee Scheme for Startups Notified
In News
What Happened
Why It Matters
Background
History & Context
What Changed
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Guarantee Cover Ceiling: BEFORE the notification, the maximum guarantee cover per borrower was capped at Rs 10 crore. NOW, the ceiling has been doubled to Rs 20 crore, enabling startups to access larger pools of collateral-free debt.
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Annual Guarantee Fee for Champion Sectors: BEFORE, startups paid standard guarantee fees based on loan brackets (typically up to 2 percent). NOW, startups in the 27 Make in India 'Champion Sectors' pay a heavily subsidized flat fee of 1 percent.
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Venture Debt Accessibility: BEFORE, growing startups heavily diluted their equity due to banks' reluctance to offer uncollateralized loans. NOW, with higher state-backed guarantees, commercial banks and NBFCs are incentivized to provide venture debt for scaling operations.
Prelims Angle
NCERT Connection
Practice Questions
Q1
Correct Statement(s)Consider the following statements regarding the Credit Guarantee Scheme for Startups (CGSS): 1. The scheme is operated and managed by the National Credit Guarantee Trustee Company (NCGTC). 2. Under the expanded scheme, the maximum guarantee cover per borrower has been increased to Rs 20 crore. Which of the statements given above is/are correct?