TALKING POINT: Need multiple startup funding channels, not just SIDBI

“I don’t see why banks also shouldn’t be disbursing startup funding, apart from just the Small Industries Development Bank of India (SIDBI)... why should funds be disbursed only through one channel,” Sitharaman opined, while speaking at an event here to mark the first year of the Startup India Action Plan unveiled by Prime Minister Narendra Modi on January 15, last year. The Minister said the possibilities of multiple funding channels for startups need to be explored with the Reserve Bank of India, commercial banks, venture capitalists as well as Finance Ministry officials. 

In June last year, the union Cabinet approved establishment of the Fund of Funds for Startups (FFS) at SIDBI for contribution to various Alternative Investment Funds (AIF) registered with the Securities and Exchange Board of India, which would extend funding support to startups. A corpus of Rs 10,000 crore could potentially be the nucleus for catalysing Rs 60,000 crore of equity investment and twice as much debt investment, the government said announcing the FFS. The government provided Rs 500 crore to the corpus in 2015-16 and Rs 600 crore was earmarked for the 2016-17 fiscal. The Department of Industrial Policy and Promotion (DIPP) would monitor and review performance in line with the Startup India Action Plan, while SIDBI would manage day-to-day operations of the FFS. 

Sitharaman met various groups of startup stakeholders in India, including incubators, accelerators, venture capitalists and banks. On tax concessions for startups, she said her Ministry has already taken up the issue with the Finance Ministry and awaits some Budget announcements when it is presented in Parliament on February 1. “Tax matters have to await the budget that comes once in 12 months, because taxation can only be a budget announcement. In tax and tax-related matters some progress has happened... let’s see what the budget brings,” she said.