Govt. Proposes $310 Mn Credit Guarantee Scheme For Startups

The commerce and industry ministry has proposed a $310 Mn (INR 2,000 Cr) credit guarantee scheme for startups to help them access funds. Commerce and Industry Minister Nirmala Sitharaman, in a written reply to Lok Sabha, said, “For the scheme, a corpus contribution of INR 2,000 Cr is proposed keeping in mind the challenges faced by startups in accessing funds.”

Earlier in June 2017, DIPP Secretary Ramesh Abhishek announced that the Union Cabinet is expected to approve the $300 Mn (INR 2,000 Cr.) fund for startups by the end of July 2017. This announcement was made at the Startup India Hub launch.

The proposed scheme will provide a credit guarantee of up to $7.7 Mn (INR 49.5 Cr) per case, inclusive of a term loan, working capital or any other instrument of assistance. The amount can be extended by member lending institutions to finance an eligible startup recognised by the DIPP.

Earlier this month, it was reported that the minister is looking to set up a Startup Coast in Karnataka to facilitate entrepreneurs in South India, as part of efforts by the Indian government.

The Startup Coast will comprise two innovation centres and up to five incubation hubs in colleges. Apart from this, it will also have a 100-seater workspace in Mangaluru. The project will also entail the installation of 20 to 30 laboratories in schools across the region.

Under the umbrella of ‘Startup India, Stand Up India’ movement, the central and state governments are offering loads of perks, including the $1.5 Bn “Fund of Funds” scheme, tax exemptions and the inclusion of foreign investment. However, about $5.2 Mn (INR 33.63 Cr) till March 31, 2017 was actually disbursed. To accelerate the startup revolution, the government promised to disburse $760K (INR 5 Cr) as collateral-free loans to the startups in March 2017.

Under the FFS, as per the most recent Startup India status report, as of Jul 17, 2017, SIDBI has committed about $96.5 Mn (INR 623.50 Cr) to 17 Alternative Investment Funds, and 67 Startups have received funding from various AIFs.

In her personal capacity, Nirmala Sitharaman has taken a number of steps to ensure the proliferation of Indian startups. In June 2017, she inaugurated the Startup India Online Hub. She also announced a startup meet across SAARC nations and encouraged resolution for online vendor issues with ecommerce players.

(The development was reported by Money Control)

Update – July 21 2017 – 11:15 am

An earlier version of this article wrongly stated that only $848K has been disbursed under the Fund of Funds till date. That has been rectified to mention that till March 2017, about $5.2 Mn has been disbursed to startups under Fund of Funds. Apart from this other information from the most recent Startup India status report was added.