Start-up India Seed Fund Scheme

Start-up India Seed Fund Scheme

The Start-up India Seed Fund Scheme (SISFS) was approved for the period of the coming 4 years effective from 2021-2022. It is going to be implemented with effect from 1st April 2021. The Scheme intends to give monetary assistance to start-ups for proof of concept, prototype development, product trials, market entry as well as commercialization. Rs. 945 Crore amounts would be divided over the next 4 years for giving seed funding towards eligible start-ups through suitable incubators across India. The scheme is anticipated to support around 3600 start-ups.

A number of measures have been stated under Atmanirbhar Bharat Package, which is beneficial for Startups. Some of these benefits are stated below:

Benefits under ‘Atmanirbhar Bharat’ for Startups

1. Reserve Bank of India 

a) Rescheduling of Payments – Term Loans and Working Capital Facilities
i.    Regarding all term loans (which includes agricultural term loans, retail and crop loans), all commercial banks (which includes regional rural banks, small finance banks as well as local area banks), co-operative banks, all-India Financial Institutions, and NBFCs (which includes housing finance companies) (“lending institutions”) has been permitted to grant a moratorium of 3 months on payment of all installments falling due amid 1st March 2020 and 31st May 2020. Considering the extension of lockdown and ongoing disruption on account of COVID-19, all lending institutions have been permitted towards extending the moratorium by another 3 months i.e., from 1st June 2020 to 31st August 2020 on payment of all installments with regard to term loans.

ii.    Regarding working capital facilities authorized in the form of cash credit/overdraft, lending institutions have been permitted to defer the recovery of interest applied relating to all such facilities from 1st March 2020 up to 31st May 2020. Also, a further extension has been granted up to 31st August 2020.

iii.    Kamath Committee: An expert committee has been made by the Reserve Bank of India (RBI) under the chairmanship of Shri K.V. Kamath, that made recommendations on the essential monetary parameters to be formed in the resolution plans under the ‘Resolution Framework for Covid19-related Stress’ accompanied by sector-specific benchmark ranges for such parameters. The recommendations of the Committee were broadly acknowledged by RBI. Consequently, RBI had specified five specific fiscal ratios and the sector-specific thresholds for each ratio respecting 26 sectors to be considered while finalizing the resolution plans.
b) Easing of Working Capital Financing

Regarding the facilities of working capital which was sanctioned for borrowers going through pressure through the economic consequence of the pandemic, lending institutions might recalculate the ‘drawing power’ by reducing the margins and/or reassessing the working capital cycle. Furthermore, accounts provided relief under these instructions would be subjected to subsequent supervisory review relating to their justifiability on account of the economic outcome from COVID-19.

a) Measures for businesses which includes MSMEs – These measures would support eligible start-ups

i.    Rs 3 lakh crore has been allocated for Emergency Working Capital Facility for Businesses, which includes MSMEs.

ii.    Rs 20,000 crore has been allocated for Subordinate Debt for Stressed MSMEs.

iii.    Rs 50,000 crore has been allocated for Equity infusion for MSMEs through Fund of Funds.

iv.    New definition of MSME:

-    The definition of micro-manufacturing and services unit had been increased to Rs. 1 crore of investment and Rs. 5 crores of turnover. The limit of the small units had been increased to Rs. 10 crores of investment and Rs 50 crores of turnover. Also, the limit of a medium unit had been increased to Rs 20 crore of investment and Rs. 100 crores of turnover. The limit for medium manufacturing and service units had also been increased to Rs. 50 crore of investment and Rs. 250 crores of turnover. It was decided that the turnover relating to exports would not be counted in the limits of turnover for any group of MSME units whether micro, small or medium.
b) Global tenders have been disallowed up to Rs 200 crore, providing preference towards domestic suppliers and boost to start-ups.

c) Production-Linked Incentive (PLI) Scheme: For improving India’s Manufacturing Capabilities and Enhancing Exports – Atmanirbhar Bharat, in the PLI Scheme, ten key sectors have been introduced. This would make Indian manufacturers worldwide competitive, help in attracting investment in the areas of core competency as well as cutting-edge technology; make certain efficiencies; make economies of scale; improve exports and make India an essential part of the global supply chain. It intends towards overall growth in the economy and makes huge employment openings

d) Reliefs through Employee Provident Fund (EPF): According to the Pradhan Mantri Garib Kalyan Package (PMGKP), payment of 12% of the employer as well as 12% employee contributions has been made into EPF accounts of eligible establishments. This was given earlier for the salary months of March, April, and May 2020. This support has been extended for an additional 3 months to salary months of June, July, and August 2020. This provisioned aid of Rs 4,860 crore to 3.67 lakh establishments, has been allocated for 72.22 lakh workers.

e) EPF contribution decreased for Business and Workers for 3 months – As per this package, the statutory rate of EPF contribution of both company and worker was lessened to 10% of basic wages and dearness allowances from a prevailing rate of 12% for all class of establishments covered under the Employees' Provident Funds & Miscellaneous Provisions Act, 1952. The lessening in statutory rate of contributions from 12% towards 10% for wage months May 2020, June 2020 as well as July 2020 has been notified through dated May 18, 2020. This scheme was applicable for workers who were not qualified for 24% EPF support as per the PM Garib Kalyan Package and for its extension. The decrease in the EPF contributions rate from 12% to 10% of basic salaries as well as Dearness allowances were made for the benefit of both 4.3 crore employees/members and companies of 6.5 lakhs establishments to tide over the instant liquidity crisis during the Pandemic situation. 

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eStartIndia Team

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