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RBI plans to ease rules for tech start-ups to access funds | Reuters

MUMBAI The Reserve Bank of India (RBI) plans to let start-ups receive foreign venture capital investments without any restrictions and enable transfer of shares from them to other residents or non-residents, making it easier for the fledging firms to access capital.

The RBI also said it was considering other measures including allowing the start-ups, most of them in the technology sector, to access offshore rupee loans, amid concerns over a slowdown in private funding into the sector.

The central bank is also considering whether to allow them to issue instruments like convertible notes to foreigners, it said in a statement on Tuesday.

The RBI announcements come at a time when some of India's biggest start-ups such as e-commerce marketplace Flipkart have switched their legal headquarters to Singapore to simplify fund-raising.

India is seeking to encourage more cutting edge technology and other start-ups - supporting new businesses in an economy needing faster growth to generate enough jobs for the coutry's burgeoning workforce.

To help start-ups create jobs, Prime Minister Narendra Modi last month lined up a four-year, $1.5 billion government fund, and a string of tax breaks for both the companies and their investors.

Bank of America Merrill Lynch has forecast Indian e-commerce will surge to $220 billion by 2025 from about $11 billion in 2015, as more people gain Internet access currently available to only 252 million of India's 1.3 billion population.

Access to fresh funds is, however, a concern for some start-ups as global private funds are tightening their purse strings, after pumping in billions of dollars into India during the last 24 months, with soaring valuations and still-distant profits denting sentiment.

According to CB Insights and KPMG, venture capital inflows in India's start-ups nearly halved to $1.5 billion in fourth-quarter 2015 from July-September. The private funding slowdown is likely to push them to look for alternate sources of funding.

"All these are important for improving the sentiment and making it easier for startups to operate and to promote foreign VC investors to put more money in India," said Harish H.V., partner at consultant Grant Thornton India.

He said the government's budget, to be presented on Feb. 29, was likely to include other supportive steps for the start-ups.

(Reporting by Devidutta Tripathy and Himank Sharma; Writing by Sumeet Chatterjee; Editing by Simon Cameron-Moore)

This story has not been edited by Firstpost staff and is generated by auto-feed.

Published Date: Feb 02, 2016 16:13 PM | Updated Date: Feb 02, 2016 16:13 PM

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