Government plans to setup a credit guarantee fund for startups

The Indian government is planning to set up a credit guarantee fund to provide funding facilities to startups in the country, Minister of State for Commerce and Industry C R Chaudhary said in a written reply to Lok Sabha on Monday.

The fund was first announced by Prime Minister Narendra Modi as part of the Startup India action plan in January 2016. It has a corpus of Rs 2,000 crore and will be managed by the Department of Industrial Policy and Promotion (DIPP). The fund is however yet to be made operational.

As per an ET report from September 2017, only startups recognised and certified by the DIPP will be able to access this fund and each startup will be eligible for loans of up to Rs 5 crore without collateral under this scheme.

DIPP had recognised 14,036 startups in the country as of November 23, 2018, according to the most recent Startup India status report.

In 2016, the government had also announced a Rs 10,000-crore fund of funds managed by the Small Industries Development Bank of India (SIDBI). However, according to the Startup India status report, less than 20% of the corpus has been allocated to alternative investment funds as of November 2018, with the total commitment standing at Rs 1,611 crore. The report also noted that around 170 startups have received funding from these investments funds.

Mohammad Mustafa, chairman and managing director of SIDBI told The Times of India last month that the fund-of-funds will close the financial year with a Rs 3,300-crore allocation to venture capital funds.