RBI to relax regulations to develop startup ecosystem

Our Bureau Mumbai. Aug 29 Mumbai August 29 | Updated on January 17, 2018

In a bid to make work environment more start-up friendly and ease regulations, the Reserve Bank of India has said that it will soon consult with the Centre and implement the recently announced proposals on start-ups.

This includes permitting start-ups to access rupee loans under the External Commercial Borrowings (ECB) framework with relaxations in respect of eligible lender, end-use and cost of borrowing, issuance of innovative FDI instruments (such as convertible notes by start-ups), streamlining of overseas investment operations for start-ups, and simplifying the process for dealing with delayed reporting of FDI-related transactions by building a penalty structure into the regulation itself.

Few other measures the RBI has been working on are also aimed at creating an enabling framework for receiving foreign venture capital, differing contractual structures embedded in investment instruments, deferring receipt of considerations for transfer of ownership, facilities for escrow arrangements and simplification of documentation and reporting procedures, easing cross-border transactions, enabling transfer of shares from foreign VCs.

Start-up mortality

In tandem with the Centre’s action plan to develop the start-up ecosystem, the RBI has highlighted the steps that should be taken to contribute to an ecosystem conducive for growth of entrepreneurship and bring down the start-up mortality in the country.

According to market research firm Xeler8 and a recent data from data analytics firm Tracxn, the start-up mortality rate is as high as 30 per cent and industry watchers feel that too much of regulation and inadequate rules for start-ups make it difficult for them to survive.

Xeler8 data says that 997 start-ups have shut shops since 2014. According to Tracxn, the number is 763 in just past 18 months.

Published on August 29, 2016

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