The Indian government has updated its Credit Guarantee Scheme for Startups (CGSS), raising the maximum guarantee cover per borrower to 20 crore rupees (US$2.4 million) from 10 crore rupees (US$1.2 million).

The revised scheme took effect on May 8, 2025 according to a notification from the Department for Promotion of Industry and Internal Trade (DPIIT).

The initiative aims to enhance access to collateral-free loans for startups through banks, non-banking financial companies (NBFCs), alternative investment funds (AIFs), and other registered financial entities.

Under the updated scheme, the guarantee cover has been increased to 85% of the defaulted amount for loans up to 10 crore rupees (US$1.2 million).

For loans exceeding that amount, the cover is set at 75%.

🔗 Source: Inc42

🧠 Food for thought

1️⃣ India’s funding revival driven by resilience across stages and sectors

India’s startup ecosystem has shown remarkable resilience in 2025, creating a strong foundation for the expanded credit guarantee scheme to have maximum impact.

The country recorded 270 startup deals worth USD 7.9 billion in Q1 2025 alone, representing an 8% increase year-on-year despite global economic headwinds 1.

This rebound momentum began in 2024, when India’s venture capital funding surged to USD 13.7 billion, 1.4 times higher than 2023 levels, with both deal volume (up 45%) and deal size increasing across the board 2.

The ecosystem is also diversifying geographically, with over 51% of startups now based in Tier II and III cities rather than traditional metro hubs, indicating more widespread entrepreneurship that could benefit from the expanded debt guarantees 1.

The government’s doubled guarantee amount comes at a critical time when sectors like Healthcare (USD 1.1 billion in Q1), Auto Tech (USD 1.1 billion), and Enterprise Applications (USD 650.7 million) are showing strong investment potential 13.

2️⃣ Credit guarantee schemes emerge as global policy tool for entrepreneurship

The expanded CGSS reflects a worldwide trend where governments use credit guarantees as a strategic lever to support entrepreneurial growth.

During economic challenges like COVID-19, governments globally launched 57 distinct credit guarantee schemes specifically for small and medium enterprises, demonstrating the recognized value of this mechanism across developed and developing economies 4.