Credit Guarantee Scheme for Startups notified by DPIIT

New Delhi, Oct 7 (KNN) To provide collateral-free loans to Startups, Department for Promotion of Industry and Internal Trade (DPIIT) has notified the Credit Guarantee Scheme for Startups (CGSS) on Thursday.

Loan or debt facilities sanctioned an eligible borrower on or after October 6 would be covered under the scheme, as per the notification.

Under this scheme, borrowers will get a maximum guarantee cover per borrower of Rs 10 crore.

DPIIT also mentioned the credit facility being covered under this scheme should not be covered by any other guarantee scheme. 

“The Central Government has approved the ‘Credit Guarantee Scheme for Startups (CGSS)’ for the purpose of providing credit guarantee to loans extended by member institutions (MIs) to finance eligible borrowers being startups,” read the notification.

To be eligible Startups must have reached the stage of stable revenue over a 12-month period as assessed by audited monthly statements.

Startups should be amenable to debt financing as an option and no default to any lending/investing institution and not classified as a non-performing asset (NPA) according to RBI guidelines is also the eligibility criteria.

Central government will set up a trust or fund to guarantee payment against default in loans or debt extended to eligible borrowers.

The Board of National Credit Guarantee Trustee Company will manage the trust or fund as the Trustee of the Fund.

Lending institutions will have to closely monitor the borrower accounts and evaluate credit applications.  

They also have to select commercially viable proposals with due diligence and conduct accounts of the borrowers.

DPIIT will also constitute a Management Committee to oversee the trust’s affairs which will review, supervise and monitor the trust’s functioning and provide guidance on broader policy matters related to the scheme.  (KNN Bureau)