After much long gap of new central government’s proposed Rs.10,000-Crore startup fund in the previous Budget, in July 2014, Reserve Bank of India (RBI) has finally agreed to allot about Rs 2,000 crore in the next financial year i.e. 2016 onwards, to a startup-specific fund, reported Economics Times.
As per this new 2000-crore startup fund plan, a seven-year fund-offunds will be carved out of the Rs 10,000-crore allocation and managed by a nodal bank. The money will be deployed to investment firms that apply for it. SIDBI and ICICI Bank are the contenders to be named as the nodal bank where the RBI ‘loaned’ startup fund will be parked, the official source said.
A senior SIDBI (Small Industries Development Bank of India) official said the bank, which manages about 60 investments in VC funds, was being consulted by the government on setting up the startup fund.
New fund could restrict flight or startup abroad as it may include a clause allowing venture funds drawing from it to invest the money only in India-registered startups. Several new startups are opting to register in Singapore or the US to take advantage of easier regulations there.
The new fund will operate in a co-investing model, whereby VC funds will have to put in 70-90% of the investment and take 20-30% from the nodal bank. However, the percentage of the government’s contribution is yet to be decided.
The promised 10,000-crore startup fund by Modi-government has been in the papers only for last 6 months and nothing has been done so far till RBI come up with this 2000-crore fund for startups in India and that’s too for fiscal year 2016 onwards, although India’s VC and Angel investor community, which invested an alltime high of $2.1 billion in Indian startups last year, welcomed the move however the startups & entrepreneurs community has now given up the patience big promises made but given peanuts so far.