Spurring innovation: BIRAC, TDB may manage key tranches of ₹1 trn RDI fund

BIRAC and TDB are expected to be named second-level fund managers for the ₹1-trillion RDI fund, enabling long-term low-cost capital flow to biotech and deeptech startups

The government is likely to appoint two focused research organisations (FROs) — the Biotechnology Industry Research Assistance Council (BIRAC) and the Technology Development Board (TDB) — as second-level fund managers for the proposed ₹1 trillion Research, Development and Innovation (RDI) fund, according to sources. 

“BIRAC and TDB have made successful presentations before the government. They have received a verbal go-ahead but are still awaiting formal confirmation, which is likely to come within a week,” one source said. 

As second-level custodians, the two organisations will set up separate investment committees comprising venture capitalists and subject-matter experts, which will further pump money into startups. These panels will evaluate proposals and channel capital to high-impact startups. BIRAC will focus on biotech ventures, while TDB will target deeptech companies across sectors. 

Last month, Prime Minister Narendra Modi launched the RDI fund to boost private sector-led research and innovation. In this year’s Budget, Finance Minister Nirmala Sitharaman had allocated ₹20,000 crore to the Department of Science and Technology (DST) for 2025-26. She had first announced the ₹1 trillion fund in her Budget speech. DST is the nodal ministry for the fund. 

Fund structure and money flow 

As for the structure, another source said, the amount would be transferred from the Consolidated Fund of India to the Special Purpose Fund (SPF) at a 1 per cent interest rate for 50 years. The SPF is being set up under the Anusandhan National Research Foundation (ANRF). The amount will then flow to the second-level custodians at a 3-4 per cent interest rate and ultimately to the startups. 

“The Government of India will give a loan to ANRF, and it would be a 50-year loan at a 1 per cent interest rate. It’s long-term capital. Then, ANRF will give (the money) to the second-level fund managers at a 3 or 4 per cent loan. It’s not clarified whether it will be 3 or 4 per cent, but it will not be more than 4 per cent. This is again long-term capital, and the time period could be around 20 years,” the person quoted above said. 

When investing in startups through their investment committees, second-level fund managers can pour money in the form of optionally convertible debentures (OCDs) and compulsory convertible debentures (CCDs). OCDs and CCDs are loan instruments that start as debt but can be converted into equity. “These are loans, but can be converted into equity anytime. This way, second-level fund managers can also grow their wealth," the first source said.

 

Startups financing 

This financial year, the government plans to allocate ₹2,000 crore each to BIRAC and TDB from the overall ₹20,000 crore. The funding pattern will continue for five years, and in total, both organisations will receive ₹10,000 crore each.

 

However, as a caveat, funding only covers up to 50 per cent of the assessed project cost for projects at Technology Readiness Levels 4 and above. This means startups are required to secure another 50 per cent funding from private players

 

“In case of startups that have already secured 50 per cent funding from industry, they will be able to reach out to the designated second-level fund managers for raising the remaining amount. However, startups can also approach BIRAC first and secure a sanction letter from them. They will then have around six months to raise another 50 per cent,” the person added.

 

Apart from funnelling funds to the second-level fund managers, the government will also contribute to alternative investment funds (AIFs). During the fund launch, it invited applications from venture capitalists and existing non-banking financial companies that are planning to establish AIFs. The deadline to submit applications has been postponed from December 15 to January 15. 

Spurring innovation

• RDI funds to flow from Anusandhan National Research Foundation to second-level fund managers
• BIRAC to back bio-tech; TDB to focus on deeptech firms
• Startups must raise 50% funds from industry
• BIRAC, TDB to get ₹2,000 crore in FY26