Indian startups may get pension, insurance funds

New Delhi: The government has started deliberations on easing regulations to allow pension and insurance funds to flow to startups, giving them access to stable, long-term domestic capital.Indian startups rely excessively on foreign risk capital in the absence of local funding. More than 85% of investment in Indian startups comes from overseas. Domestic pension and insurance funds have a cumulative corpus of over Rs 1.5 lakh crore.A top official told The Economic Times that the government is seized of the fact that startups need a vast amount of capital to grow. “The government is examining ways to allow pension and insurance funds to deposit a small proportion of their profits in these startups,” he said.The Centre also wants Indian business houses to invest a proportion of their wealth in startups. This could be incentivised under a comprehensive plan to unlock domestic savings for startups, the official said.Local OwnershipThe government feels this will lead to ownership of Indian startups staying local, promote economic growth and create domestic employment opportunities.Commerce and Industries Minister Piyush Goyal had at the ET Startup Awards earlier this month said that more domestic capital needs to flow into startups, pointing out that foreign investors were picking up stakes at low valuations. He has mooted an Indian industry-led fund to invest in local startups.“I suggested that they (industry) create a Rs 10,000 crore fund, a domestic fund, managed totally professionally, which can identify opportunities that come out of the startup system at an early stage,” Goyal had said.At the recent Startup India International Summit organised by the government in Delhi, stakeholders had sought access to local pension and retirement funds, pointing to regulations that had held up such investment. They suggested a relaxation in investment criteria in exchange-listed Alternative Investment Funds (AIFs) with a minimum corpus to help channel pension fund investments into startups.“It would considerably ease roadblocks for investment by NPS (National Pension System) in AIFs. Pension funds can start by allocating a small percentage of their corpus into AIFs currently and then gradually increase it as they gain more experience,” one of them said.

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