NEW DELHI: The government on Friday notified the credit guarantee scheme for startups to provide them collateral-free loans up to a specified limit. The Department for Promotion of Industry and Internal Trade (DPIIT), in a notification, said loan facilities sanctioned to an eligible borrower on or after October 6, would be eligible under the scheme. The Credit Guarantee Scheme for Startups (CGSS) is for the purpose of providing credit guarantees to loans extended by non-banking finance companies(NBFCs) and other financial institutions to the startups to finance eligible borrowers, it said.
“The 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,” the notification read.
The extent of transaction-based cover will be 80% of the amount in default if the original loan sanction amount is up to Rs 3 crore, 75% of the amount in default if the original loan sanction amount is above Rs 3 crore, and up to Rs 5 crore, and 65% of the amount in default if the original loan sanction amount is above Rs 5 crore (up to Rs 10 crore per borrower), it stated
The umbrella-based guarantee cover will provide guarantee to Venture Debt Funds (VDF) registered under AIF regulations of SEBI in view of the nature of funds raised by them and debt funding provided by them. The extent of umbrella-based cover will be the actual losses or up to a maximum of 5% of pooled investment, on which cover is being taken from the fund, in eligible startups.