RBI will ease norms for funding to startups, says Governor

RBI Governor Raghuram RajanTo facilitate growth of startup movement in India, the Reserve Bank of India (RBI) will ease regulations to allow startups to raise foreign venture capital through innovative instruments, the banking regulator Reserve Bank of India has said.

Besides making access to foreign capital easier, the central bank will also simplify the process for outward remittances and allow innovative instruments like convertible notes, the central bank said in a press release after announcement of the monetary policy review recently.

“We want to simplify the process. If a startup wants money, it can take it in different forms, complicated contracts,” RBI Governor Raghuram Rajan said in a post-policy press conference.

“The broad point is that we are supporting the startup process by making it easier to raise money often from abroad but also simplifying compliance with regulation including putting a lot of forms online so that they really don’t have to go from pillar to post,” Rajan added.

RBI’s measures are in line with the government’s ‘Start-up India’ initiative, which envisages making the ecosystem conducive for growth of startups.

In case of transfer of ownership of a startup enterprise, the RBI is considering enabling an escrow or indemnity arrangement up to a period of 18 months.

RBI will also clarify issuing of shares as sweat equity by startups and collection of payments by startups on behalf of their subsidiaries abroad.

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