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DIPP to move cabinet note on credit guarantee fund for startups

08 September, 2017

To help early-stage ventures overcome fund crunch, the Department of Industrial Policy and Promotion (DIPP) will move a cabinet note for a credit guarantee fund for startups, media reports said.

“We have finalised the details of how the fund has to be managed. A cabinet note will be moved soon,” The Economic Times quoted a senior government official as saying.

The fund, announced by Prime Minister Narendra Modi as part of the Startup India action plan in January 2016, is yet to see the light of the day. However, in July thus year, the government said it was formulating a Credit Guarantee Scheme for Startups (CGSS) with a corpus contribution of Rs 2,000 crore. The fund, it said, will enable startups raise loans without any collateral.

The proposed scheme will provide a credit guarantee up to Rs 5 crore per case inclusive of term loan, working capital or any other instrument of assistance extended by a member lending institution to finance an eligible borrower. So far, the industry department has recognised 2,865 applicants and 60 of them have been approved for a tax holiday, the ET report said.

The credit guarantee scheme will provide portfolio-based guarantees, and each portfolio will comprise at least 10 eligible startup loans during a particular financial year, the government said.

Last year, the government announced a Rs 10,000-crore fund of funds managed by the Small Industries Development Bank of India (SIDBI). The fund will invest in SEBI-registered VC funds which, in turn, will invest in startups. It has committed Rs 623 crore to alternative investment funds and financed 67 startups.

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DIPP to move cabinet note on credit guarantee fund for startups

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