The government is formulating a Rs 2,000 crore worth credit guarantee scheme for Department of Industrial Policy and Promotion (DIPP) recognised start-ups to enable them to raise collateral-free loans, informed Commerce and Industry Minister Nirmala Sitharaman through a written reply to a question in Rajya Sabha.
The Minister said that the proposed Credit Guarantee Scheme for Start-ups (CGSS) will provide a credit guarantee of upto Rs 500 lakh per case, inclusive of term loan, working capital or any other instrument of assistance extended by Member Lending Institutions (MLIs) to finance an eligible borrower. The assistance instruments could be in the form of venture debt, working capital, debentures, optionally convertible debt, etc.
Smt @nsitharaman informs the Parliament on the proposed Credit Guarantee Fund for Startups https://t.co/w5ZOb4Ikdi @startupindia pic.twitter.com/fQEgoiI3oW
— Commerce Minister (@CimGOI) July 26, 2017
Under the supervision and monitoring of a Management Committee (MC), the scheme shall provide a portfolio- based credit guarantee. The Commerce Minister emphasised that each portfolio shall comprise at least 10 eligible start-up loans during a particular financial year. Coverage would be extended to the portfolio and the portfolio loss would be reckoned against the net cash losses during the portfolio life.
The government is also working upon setting up a Risk Evaluation Committee (REC) under the credit guarantee scheme to address conflicts pertaining to interest issues, Sitharaman added.
