RBI Finally Allocates INR 10,000 Cr To SIDBI To Set Up VC Fund; Hope Implements Quickly!!

If we look at the Nasscom report, India is the fourth largest base for young businesses in the world with more than 3,100 tech startups. Further, this is expected to increase to 11,500 by 2020. This is how the startup ecosystem is expanding in India. However, unfortunately the government seems to be failed on all fronts to match the pace of the growing startup ecosystem. Despite, the clear cut mandate by Indian people, Modi-led BJP government could not worked well on the government machinery which is almost paralyzed or moving very slow, which is actually hurting the sentiments of small businesses across the country.

It’s been almost a year since Finance Minister Arun Jaitley proposed a INR 10,000 Cr. startup fund during budget presentation of 2014-15, but nothing is happening on ground. Since then, we are getting periodic updates about the allocation of funds but nothing in terms of actual implementation.

Finally, the Reserve Bank of India has come out and said that it has allocated INR 10,000 Cr to Small Industries Development Bank of India (SIDBI), in order to set up a VC fund to attract private capital for startups. But it doesn’t end up here, as the deadline for the actual implementation of fund was still missing from the picture.

Business community has no clue about the actual implementation of this fund, when it will come into effect, how it will work, there are so many things which needs to be answered with concrete steps.

As per the government, the fund was proposed ideating from the SBIR fund of US which is an initiative to use public funds to spur development of startup ecosystem. The reason to establish the allocated fund was to provide stable growth in startups and MSME sector which would help boost prospective entrepreneurship.

The capital is planned to be invested in startups by way of providing equity, quasi equity, soft loans and other risk capital. Recently, RBI had also agreed to allocate INR 2,000 Cr. in 2015-16 to a startup focused fund.

Amid all these back to back announcements of allocating fund to set up a VC fund to attract private capital for startups, firstly, the most important part ‘Deadline’ is still missing. Secondly, the government should come out of slow motion and improve this extra slow machinery which is actually killing crucial time of startup ecosystem. Thirdly, the government should openly tell that how it is actually planning to utilize this fund, which sectors it will cover and most importantly When? As of now, we can only wait and watch and see what happens next.