DIPP to appoint trust to run Rs 2000 crore credit guarantee fund to help finance startups
BENGALURU: The Department of Industrial Policy and Promotion (DIPP) is in the process of setting up a trust to run a Rs 2000 credit guarantee fund that will provide risk cover to lending institutions that give collateral-free credit to startups. The fund was announced by DIPP Secretary Ramesh Abhishek last year.
"We will set up a trust and it will run the fund. We may appoint an existing trust after due diligence," DIPP joint secretary Shailendra Singh told ET on the sidelines of the Make in India - Karnataka conference in the city this week.
Singh said the trust should be set up in a couple of months and it will start rolling out from the fund.
"The fund will give Rs 500 crore per year to lending institutions that finance startups which fall under the startup definition of DIPP," Singh said.
The DIPP secretary had said during a conference in October that the 2,000 crore corpus will provide a risk cover of up to 80% for collateral free credit that banks give to startups.
During Tuesday's session at a hotel in Bengaluru, Singh also received an open request from Karnataka IT, BT and tourism minister Priyank Kharge to commit Rs 1000 crore to the state from the Rs 10,000 crore Fund of Funds for startups.
Kharge told ET the government will also send a formal written communication to DIPP on this.
But Singh told ET that the government cannot apply for the fund directly since the fund of funds is only meant for venture capital funds.
"Only Sebi-approved alternative investment funds can apply for this (Rs 10,000 crore) fund. The government per se cannot apply for a fund. But if a government has a venture fund, such as the Karnataka government's fund for biotechnology, then that fund can apply," Singh said. "Several such government-constituted funds have applied," he added.
The Karnataka government has several funds focused on startups such as the Rs 200 crore Startup Fund of Funds, the Rs 50 crore Kitven Fund -3 (Biotech) and the Idea2POC fund.
"We will set up a trust and it will run the fund. We may appoint an existing trust after due diligence," DIPP joint secretary Shailendra Singh told ET on the sidelines of the Make in India - Karnataka conference in the city this week.
Singh said the trust should be set up in a couple of months and it will start rolling out from the fund.
"The fund will give Rs 500 crore per year to lending institutions that finance startups which fall under the startup definition of DIPP," Singh said.
The DIPP secretary had said during a conference in October that the 2,000 crore corpus will provide a risk cover of up to 80% for collateral free credit that banks give to startups.
During Tuesday's session at a hotel in Bengaluru, Singh also received an open request from Karnataka IT, BT and tourism minister Priyank Kharge to commit Rs 1000 crore to the state from the Rs 10,000 crore Fund of Funds for startups.
Kharge told ET the government will also send a formal written communication to DIPP on this.
But Singh told ET that the government cannot apply for the fund directly since the fund of funds is only meant for venture capital funds.
"Only Sebi-approved alternative investment funds can apply for this (Rs 10,000 crore) fund. The government per se cannot apply for a fund. But if a government has a venture fund, such as the Karnataka government's fund for biotechnology, then that fund can apply," Singh said. "Several such government-constituted funds have applied," he added.
The Karnataka government has several funds focused on startups such as the Rs 200 crore Startup Fund of Funds, the Rs 50 crore Kitven Fund -3 (Biotech) and the Idea2POC fund.
