The Cabinet on Wednesday approved a ₹10,000-crore ‘Fund of Funds for Start-ups (FFS)’ with an aim to generate 18 lakh jobs. This is in line with the ‘Start-up India Action Plan’ unveiled by the government in January.

“The fund is expected to generate employment for 18 lakh persons on full deployment... A corpus of ₹10,000 crore could potentially be the nucleus for catalysing ₹60,000 crore of equity investment and twice as much debt investment,” an official statement said.

The ₹10,000-crore FFS corpus shall be built up over the 14th and 15th Finance Commission cycles subject to progress of the scheme and availability of funds, it said.

An amount of ₹500 crore has already been provided to the corpus in 2015-16 and ₹600 crore earmarked in 2016-17.

“The Cabinet has approved the establishment of ‘Fund of Funds for Start-ups’ at Small Industries Development Bank of India (SIDBI) for contribution to various Alternative Investment Funds (AIF), registered with SEBI which would extend funding support to start-ups,” it said.

This would provide a stable and predictable source of funding for start-up enterprises and thereby facilitate large-scale job creation. Further provisions will be made as grant assistance through gross budgetary support by the Department of Industrial Policy and Promotion, which will monitor and review performance in line with the ‘Start-up India Action Plan’, the statement said. The government said SIDBI’s expertise would be used to manage the day-to-day operations of the fund. The monitoring and review of performance would be linked to the implementation of the action plan to enable execution as per timelines and milestones.

The move assumes significance as start-ups face several challenges such as limited availability of domestic risk capital, constraints of conventional bank finance, information asymmetry and lack of hand-holding support.

Related Topics
comment COMMENT NOW