The government announces a credit guarantee programme for startups.

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    The Department for Promotion of Industry and Internal Trade said that loans and debt facilities granted to qualified borrowers on or after October 6 would be covered by the programme.

    According to the statement, “the Credit Guarantee Scheme for Startups has been approved by the Central Government for the purpose of extending credit guarantees to loans made by member banks to fund eligible borrowers who are startups.

    It goes on to say that this plan will help startups get crucial debt financing without the need for collateral.

    Financial intermediaries (banks, financial institutions, NBFCs, and AIFs) that participate in lending and investing and meet the eligibility requirements outlined in the scheme are included in the scheme.

    Startups must be approved, be in good standing with all lending and investing institutions, have a stable revenue stream that is amenable to debt financing as determined by audited monthly financial statements covering a 12-month period, and not be regarded as a non-performing asset as defined by the RBI in order to qualify for the benefits of this programme.

    The maximum guarantee coverage is capped at 10 crore rupees per borrower. According to the Department, no alternative guarantee method should have been used for the credit arrangement being discussed here.

    With the aim of ensuring payment against default in loans or debt issued to qualifying borrowers, the Indian government will establish a trust or fund that will be supervised by the Board of National Credit Guarantee Trustee Company Ltd. As the Fund’s Trustee.

    Additionally, it emphasised that lending institutions must handle borrower accounts with usual banking prudence, employ business judgement and due diligence to select economically viable concepts, and assess credit applications using prudent banking judgement.

    These organisations ought to be obligated to monitor the borrower’s account closely.

    The DPIIT will also create a Management Committee to oversee the trust’s operations.

    The committee’s duties will include investigating, overseeing, and keeping tabs on the trust’s operations. Additionally, it will be vital to provide the trust with essential guidance on major plan-related policy matters.