According to the RBI chief Raghuram Rajan, the Reserve Bank of India (RBI) will ease regulations to allow startups to raise foreign venture capital(VC) through diversified instruments as the long term goal of the bank is to support growth of entrepreneurship in India.
RBI’s measures are in harmony with the recently launched government’s Start-up India initiative which aims at making India the Startup hub of the world.
Other than making access to foreign capital easier, the RBI will also simplify the process for outward remittances and allow various innovative instruments like convertible notes.
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.
In the press release of RBI, it is mentioned that The RBI will also discontinue physical forms from February 8 and all investments and financial transactions will be reported electronically.
According to the RBI, the new measures will help startups receive foreign venture capital and enable transfer of shares from foreign venture capital investors to other residents or non-residents.
The RBI is also thinking of allowing startups to access rupee loans under the ECB framework with easier regulations for eligible lenders.