Department of Industrial Policy & Promotion (DIPP) who is in charge of framing guidelines for a credit guarantee fund for startups, enables startups to being able to borrow money.
Earlier, the matter was being dealt with by the department of finance, until recently when DIPP took over the matter and except it to be finalized by September.
The Startup Action Plan announced by Prime Minister Narendra Modi in January said that a credit guarantee mechanism through the National Credit Guarantee Trust Company or the Small Industries Development Bank of India (Sidbi) would get funding of Rs 500 crore annually for the next four years.Government officials are affirmative that the credit guarantee fund would help in the flow of venture debt from the formal banking system.
In January, the government had approved the creation of a credit guarantee fund to back the Mudra Yojana under the Stand Up India scheme. The objective was to leverage the institutional credit structure to reach out to undeserved sectors of the population, including Scheduled Castes and Scheduled Tribes and women entrepreneurs.
The Mudra credit guarantee fund is expected to guarantee over Rs 1 lakh crore worth of loans to micro and small units initially. Among other incentives for startups, the government has started providing tax exemption to eligible companies for three years from incorporation. Only companies registered after April 2016 can apply for the tax benefits. DIPP has proposed that the time limit for tax exemption be extended to seven years.
Once the guidelines are finalized, they are likely to be submitted to the cabinet for approval. DIPP is also monitoring the disbursal of money from the fund of funds by Sidbi. Of the Rs 10,000 crore provisioned for startups, Sidbi has sanctioned Rs 168 crore for six alternative investment funds.
By Baishakhi Dutta
