RBI relaxes foreign fund investments in startups

The Reserve Bank of India (RBI) has now allowed foreign venture capital investors (FVCIs), registered with the Securities and Exchange Board of India (SEBI), to invest in Indian startups without any prior permission from the central bank. The relaxation of rules will be applicable to 10 sectors—biotechnology, IT related to hardware and software development, nanotechnology, seed research and development, research and development of new chemicals in medicine, dairy industry, poultry industry, and production of bio-fuels, hotels-cum-convention centres with seating capacity of over 3,000 and in the infrastructure sector.

“They will not require any approval from and can invest in…equity or equity-linked instrument or debt instrument issued by an Indian ‘start-up’ irrespective of the sector in which the startup is engaged,” a statement from RBI said.

According to RBI, “a startup will mean an entity (private limited company or a registered partnership firm or a limited liability partnership) incorporated or registered in India not prior to five years, with an annual turnover not exceeding Rs 25 crore in any preceding financial year, working towards innovation, development, deployment or commercialisation of new products, processes or services driven by technology or intellectual property and satisfying certain conditions.”