The government on Wednesday approved Rs 10,000 crore ‘Fund of Funds for Startups’ to support them with an aim to generate employment for 18 lakh persons.
The fund is expected to generate employment for 18 lakh persons on full deployment...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.Official Statement
The decision was taken in the Union Cabinet meeting chaired by Prime Minister Narendra Modi.
The Cabinet has approved the establishment of ‘Fund of Funds for Startups’ (FFS) at Small Industries Development Bank of India (SIDBI) for contribution to various Alternative Investment Funds (AIF), registered with SEBI, which will extend funding support to startups.
This is in line with the ‘Startup India Action Plan’ unveiled by the government in January.
The corpus shall be built up over the 14th and 15th Finance Commission cycles, subject to progress of the scheme and availability of funds. This would provide a stable and predictable source of funding for startup enterprises and thereby facilitate large scale job creation.
An amount of Rs 500 crore has already been provided to the corpus of FFS in 2015-16 and Rs 600 crore earmarked in the 2016-17.
This move assumes significance in the face of several challenges faced by startups, such as limited availability of domestic risk capital, constraints of conventional bank finance, information asymmetry and lack of hand holding support from credible agencies.
(With PTI inputs)
(At The Quint, we are answerable only to our audience. Play an active role in shaping our journalism by becoming a member. Because the truth is worth it.)