DPIIT working on credit guarantee, seed fund schemes for startups

This scheme would give banks a comfort to lend, he said adding that it was for credit not for venture capital

The Department for Promotion of Industry and Internal Trade (DPIIT) is working on two schemes -- credit guarantee and seed funds -- to support startups in the country, a top government official has said.

DPIIT Secretary Guruprasad Mohapatra said that an inter-ministerial consultation process is on to work out the contours of the two schemes.

"We are working on a credit guarantee scheme and a seed fund scheme. Both are under inter-ministerial consultations," the secretary told PTI.

He said there would be a corpus in the credit guarantee scheme which would be given to banks and they will leverage that to lend to startups.

This scheme would give banks a comfort to lend, he said adding that it is for credit not for venture capital.

"This is for capex credit," Mohapatra added.

On the seed fund scheme, Mohapatra said that most startups actually face problems in raising finance or funds in the ideation to the proof of concept stage.

Some states like Gujarat and Kerala already have schemes like seed funds, but they are small, he said. "The central government ministries also have, but we want to put a pan India scheme," the secretary said.

Both the schemes would require approval of the finance ministry and then the DPIIT would seek nod of the Union Cabinet for these two schemes.

He also said that certain startups have raised some issues pertaining to ESOPs (employee stock option plans) and "that we have forwarded to the revenue department".

Talking about the next edition of ranking of states and union territories (UTs) on their startup ecosystem, the secretary said that the department has already started the process for that.

The department is encouraging states to develop their startup policy to promote budding entrepreneurs.

In the 2019 rankings, Gujarat has again emerged as the best performer in developing startup ecosystems for budding entrepreneurs.

The government had launched Startup India Action Plan in January 2016 to promote budding entrepreneurs in the country. The plan aims to give incentives such as tax holiday and inspector raj-free regime and capital gains tax exemption.