Coming soon, credit guarantee scheme, seed fund for startups; DPIIT working on solving funding issues

The schemes once formulated by DPIIT would have to be approved by the Ministry of Finance followed by the Union Cabinet for their implementation.

The Department for Promotion of Industry and Internal Trade (DPIIT) is looking at introducing two new schemes to solve credit-related challenges for early-stage startups in India. According to DPIIT Secretary Guruprasad Mohapatra, an inter-ministerial consultation process is underway to frame the contours of a credit guarantee scheme and a seed fund scheme, PTI reported. Under the credit guarantee scheme, the government would provide a corpus to banks through which the credit would be disbursed into startups. “This is for Capex credit,” Mohapatra noted. On the other hand, the seed fund would support startups who face challenges in securing funding in the ideation to the proof-of-concept stage.

While few states including Gujarat and Kerala already have seed funds, but they are small, according to Mohapatra. Moreover, “the central government ministries also have, but we want to put a pan India scheme.” The schemes once formulated by DPIIT would have to be approved by the Ministry of Finance followed by the Union Cabinet for their implementation.

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Even as DPIIT looks at introducing two new schemes, the government already operates a Fund of Funds for Startups (FFS) established in January 2016 with a corpus of Rs 10,000 crore. As on November 21, 2019, SIDBI, which manages the fund, had committed Rs 3123.20 crore to 47 SEBI registered Alternative Investment Funds (AIFs). These AIFs have raised a corpus fund of Rs 25,728 crore while Rs 695.94 crore has been drawn from the FFS. Rs 2,669.83 crore were invested into 279 startups.

The government had on Friday announced the results for the second edition of the ranking of states in terms of the support offered to their startups. The ranking conducted by DPIIT had Gujarat as the best performer among participating 22 states and three union territories. Karnataka and Kerala were the ‘top performers’ followed by ‘leaders’ including Bihar, Maharashtra, Odisha, and Rajasthan. Delhi, which has been among the leading startup hubs in the country, Tamil Nadu, Andhra Pradesh etc. were adjudged ’emerging startup ecosystems’. Mohapatra said that DPIIT has already started the process for the next edition of the ranking of states and union territories.