Startups can raise $3 mn via external commercial borrowings annually: RBI

4th Oct 2016
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With a view to boosting innovation and promoting job creation, the Reserve Bank today said startups can raise external commercial borrowings (ECBs) of up to $3 million in a financial year.

They will be permitted to raise the overseas funds in rupees as well as in foreign currency.

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India has the third-largest number of startups globally.

In January, Prime Minister Narendra Modi had unveiled a slew of incentives for them, including tax holidays, an inspector raj-free regime, capital gains tax exemption and a Rs 10,000 crore corpus to provide funds. The government has also relaxed procurement norms for them.

The statement on developmental and regulatory policies announced by RBI said that startups have the potential to play a significant role in economic growth and job creation by spurring innovation and injecting competition. It said,

Taking into account the available funding channels from overseas for startups, the RBI, in consultation with the Government of India, will allow such entities to raise ECB up to $3 million or equivalent per financial year, either in INR or in any convertible foreign currency or a combination of both.

It will issue guidelines in this regard by month-end.

A National Credit Guarantee Trust Company is being envisaged with a budgetary allocation of Rs 500 crore per year for the next four years.

The statement further said that the RBI will review guidelines for Pre-paid Payment Instruments (PPI).

Currently, about 47 non-bank entities and 45 banks operate the payment systems for PPI.

In view of significant developments in the payments space using newer technologies, products and players, RBI said that it has been decided to undertake a comprehensive review of the guidelines for issuance and operations of PPIs.

The revised guidelines will be put in place by December-end. "Accordingly, the receipt and processing of fresh applications have been temporarily suspended," the central bank said.

It further said that final guidelines on Interest Rate Options will be issued by the end of October 2016. Earlier, the RBI had placed the report of the Working Group on Introduction of Interest Rate Options on its website in February 2016 and had sought comments.

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