Centre to discuss on pension fund investment in startups: DPIIT Secretary

Amiti Sen Panaji | Updated on December 07, 2019 Published on December 07, 2019

Inter-ministerial body will also examine call for priority sector lending

The government will initiate discussion on the possibility of channelising a part of employee provident fund (EPF) investments into financing startups, a senior government official has said.

"There is a major demand from startups for the government pension fund in India to carve out a small portion of its funds for investing in such ventures. We have promised that we will look into it. But we understand that pension funds are very sensitive and risk-averse as the life-long savings of pensioners are involved," said Guruprasad Mohapatra, Secretary, Department for Promotion of Industry and Internal Trade (DPIIT) in an interaction with BusinessLine.

An inter-ministerial empowered group comprising officials from the Ministries and Departments of Revenue, Financial Services, Health, Corporate Affairs and Industry, will be set up to examine the issue involving startups, Mohapatra added. Officials from tariff bodies such as CBDT and CBIC and regulatory bodies including RBI, SEBI and DFS will also be in the group. It will be headed by the DPIIT Secretary.

The startups' argument is that when foreign pension funds want to invest in India, why not allow pension fund to invest, the Secretary said. .

The issue was discussed by startups at the Startup India Global Venture Capital Summit in Goa on Saturday in which Commerce and Industry Minister Piyush Goyal participated through a video link.

The empowered group will also consider the demand made by startups that lending to the sector should be considered part of priority sector lending for banks, Mohapatra said.

Startup review council

Following discussions with startups and venture capitalists at the Summit, the Minister decided to set up a start up review council that will be headed by him for periodic review of rules and regulations related to the sector.

"So far there is no structured system for engaging with venture capital investors. The startup review council, which will have representation from six-seven key Ministries, will initially meet every two months to examine issues. Later the meetings will happen quarterly," the Secretary said.

Participants in the meeting will include startup ecosystem members, the association members and the venture capital investors' associations.

Startups have raised about $6.8 billion in the first nine months of the current fiscal compared with $5.8 billion in the same period last year, according to industry data. But the demand for funds from the sector is much more.

Employees' Provident Fund Organisation (EPFO) invests up to 15 per cent of its investible deposits into the exchange-traded funds (ETFs) . So far such investments total about ₹86,966 crore, according to government figures.

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Published on December 07, 2019
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