Lok Sabha Question No. 2962 (UNSTARRED), answered on 2023-08-07
Subject: Fintech Start-Up
Ministry: CORPORATE AFFAIRS
Asked by: Anumula Revanth Reddy

## GOVERNMENT OF INDIA

## MINISTRY OF CORPORATE AFFAIRS LOK SABHA

## UN-STARRED QUESTION NO.2962

## TO BE ANSWERED ON MONDAY, AUGUST 07, 2023/ SRAVANA 16, 1945(SAKA)

## FINTECH START-UP

## QUESTION

## 2962. SHRI ANUMULA REVANTH REDDY:

Will the Minister of CORPORATE AFFAIRS be pleased to state:

- (a)  whether  the  domestic  fintech  startup  funding  witnessed  a decline  of  47  per  cent  in  2022  as  compared  to  2021,  if  so,  the details thereof and the reasons therefor;
- (b)  the  steps  and  initiatives  taken  or  likely  to  be  taken  by  the Government to increase the domestic fintech startup funding;
- (c)  the  number  of  fintech  startups  started  and  closed  since  2019, State-wise/Year-wise; and
- (d) the number of employees who lost their jobs due to the closure of the startups during the last three years, State/year-wise?

## ANSWER

Minister  of  State  (Independent  Charge)  of  the  Ministry  of  Statistics and  Programme  Implementation;  Minister  of  State  (Independent Charge)  of  the  Ministry  of  Planning  and  Minister  of  State  in  the Ministry of Corporate Affairs.

(Rao Inderjit Singh)

(a) & (b) : As per information provided by Department for Promotion of  Industry  and  Internal  Trade  (DPIIT)  in  order  to  build  a  strong ecosystem  for nurturing innovation, startups and encouraging private  investments  in  the  startup  ecosystem  of  the  country,  the Government launched Startup India initiative on 16th January 2016.

As per eligibility conditions prescribed under G.S.R. notification 127 (E) dated 19th February 2019, entities are recognized as 'startups' under  Startup  India  initiative  by  the  Department  for  Promotion  of Industry  and  Internal  Trade  (DPIIT).  Since  the  launch  of  Startup India  initiative  in  2016,  DPIIT  has  recognised  98,119  entities  as startups as on 30th April 2023. Furthermore, DPIIT has recognised startups which are spread across more than 56 diversified sectors. As on 30th April 2023, 3,085 recognised startups are engaged in the finance technology (fintech) sector.

The Government has undertaken various efforts to promote startups  in  the  country  across  multiple  sectors  including  startups engaged  in  the  fintech  sector.  The  details  of  such  initiatives  are placed  as  Annexure-I.  Additionally,  the  Government  has  notified International Financial Services Centres Authority (IFSCA) to develop  and  regulate  financial  services,  financial  institutions  and financial  products  in  the  International  Financial  Services  Center (IFSC). To promote our startup ecosystem especially in the fintech sector,  IFSCA  has  taken  various  measures  such  as -launching  a unique 'Fin-Tech Entity Framework' focusing on fintechs and techfins. The framework provides support to startups for developing their  products/Minimum  Viable  Product  (MVP)  or  do  a  'Proof  of Concept  (PoC)  under  the  Innovation  and  Regulatory  Sandbox  of IFSCA.  IFSCA  has  also  launched  an  Incentive  Scheme  for  the fintechs  and  Startups  which  comprises  of  various  grants  like Startup  Grants,  Sandbox  Grant,  PoC  Grant,  Green  FinTech  Grant, Listing  Grant  and  Accelerator  Grants.  The  fintech  startups  also benefit  from  the  'Regulatory  Bridges'  created  by  IFSCA  with  other international regulators for global market access.

The Government has also taken several measures to increase  investment  inflows  in  the  fintech  sector.  The  Pradhan Mantri  Jan  Dhan  Yojana  (PMJDY)  has  been  targeted  at  increasing financial inclusion in India by helping in new  bank  account enrollment of beneficiaries for direct benefits transfer and accessibility  to  a  host  of  financial  services  applications.  This  has enabled Fintech startups to build technology products to penetrate the large consumer base in India.

Aadhar,  the  unique  biometric  identification  system,  allows the public to access government digital services thereby improving the  availability  and  transparency  for  social  payments  including financial assistance to those in need.

Unified  Payments  Interface  is  single  platform  that  merges various banking services and features under one umbrella and has been  built  as  a  scalable  payments  platform  supporting  digital payments in India. Jan Dhan Yojana, Aadhar and Mobile (JAM trinity) along with Unified  Payments  Interface  have  been  instrumental  in  providing technical  inclusion  and  bringing  in  transparency,  integrity  and timely delivery of financial benefits and services to the public. Key initiatives undertaken by the Government for the fintech ecosystem in  India  are  placed  as  Annexure-II.  No  data  in  regard  to  domestic Fintech  Startup  funding  is  available  with  Ministry  of  Corporate Affairs. (C) & (d): No data is available with Ministry of Corporate Affairs.

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## Annexure-I refer  to in  reply  to  Part  -  (a)  to  (b)  of  Lok  Sabha  Un-Starred  Question  No.  2962  for

answer on 07.08.2023 ANNEXURE-I The details of various programs undertaken by the Government to promote startups across the country are as under: 1. Startup India Action Plan: An Action Plan for Startup India was unveiled on 16th January 2016.  The  Action  Plan  comprises  of  19  action  items  spanning  across  areas  such  as 'Simplification and handholding', 'Funding support and incentives' and 'Industry -academia partnership and incubation'. The Action Plan laid the foundation of Government support, schemes and incentives envisaged to create a vibrant startup ecosystem in the country. 2. Fund  of  Funds  for  Startups  (FFS)  Scheme: The  Government  has  established  FFS  with corpus of Rs. 10,000 crore, to meet the funding needs of startups. DPIIT is the monitoring agency and Small Industries Development Bank of India (SIDBI) is the operating agency for FFS. The total corpus of Rs. 10,000 crore is envisaged to be provided over the 14th and 15th Finance Commission cycles based on progress of the scheme and availability of funds. It has not only made capital available for startups at early stage, seed stage and growth stage but also  played  a  catalytic  role  in  terms  of  facilitating  raising  of  domestic  capital,  reducing dependence on foreign capital and encouraging home grown and new venture capital funds. 3.  Credit  Guarantee  Scheme  for  Startups  (CGSS): The  Government  has  established  the Credit Guarantee Scheme for Startups for providing credit guarantees to loans extended to DPIIT recognized startups by Scheduled Commercial Banks, Non-Banking Financial Companies  (NBFCs)  and  Venture  Debt  Funds  (VDFs)  under  SEBI  registered  Alternative Investment Funds. CGSS is aimed at providing credit guarantee up to a specified limit against loans  extended  by  Member  Institutions  (MIs)  to  finance  eligible  borrowers  viz.  DPIIT recognised startups. 4.  Regulatory  Reforms: Over  50  regulatory  reforms  have  been  undertaken  by  the Government  since  2016  to  enhance  ease  of  doing  business,  ease  of  raising  capital  and reduce compliance burden for the startup ecosystem. 5. Ease of Procurement: To enable ease of procurement, Central Ministries/ Departments are directed to relax conditions of prior turnover and prior experience in public procurement  for  all  DPIIT  recognised  startups  subject  to  meeting  quality  and  technical specifications.  Further,  Government  e-Marketplace  (GeM)  Startup  Runway  has  been developed which is a dedicated corner for startups to sell products and services directly to the Government. 6. Support for Intellectual Property Protection: Startups are eligible for fast-tracked patent application  examination  and  disposal.  The  Government  launched  Start-ups  Intellectual Property  Protection  (SIPP)  which  facilitates  the  startups  to  file  applications  for  patents, designs  and  trademarks  through  registered  facilitators  in  appropriate  IP  offices  by  paying only the statutory fees. Facilitators under this Scheme are responsible for providing general advisory  on  different  IPRs,  and  information  on  protecting  and  promoting  IPRs  in  other countries.  The  Government  bears  the  entire  fees  of  the  facilitators  for  any  number  of patents, trademark or designs, and startups only bear the cost of the statutory fees payable. Startups  are provided with an 80% rebate in filing of patents and 50% rebate in filling of trademark vis-a-vis other companies. 7.  Self-Certification  under  Labour  and  Environmental  laws: Startups  are  allowed  to  selfcertify their compliance under 9 Labour and 3 Environment laws for a period of 3 to 5 years from the date of incorporation. 8. Income Tax Exemption for 3 years: Startups incorporated on or after 1st April 2016 can apply  for  income  tax  exemption.  The  recognized  startups  that  are  granted  an  InterMinisterial Board Certificate are exempted from income-tax for a period of 3 consecutive years out of 10 years since incorporation. 9.  International  Market  Access  to  Indian  Startups: One  of  the  key  objectives  under  the Startup  India  initiative  is  to  help  connect  Indian  startup  ecosystem  to  global  startup ecosystems through various engagement models. This has been done though international Government to Government partnerships, participation in international forums and hosting of global events. Startup India has launched bridges with over 17 countries that provides a soft-landing  platform  for  startups  from  the  partner  nations  and  aid  in  promoting  cross collaboration. 10.  Faster  Exit  for  Startups: The  Government  has  notified  Startups  as  'fast  track  firms' enabling them to wind up operations within 90 days vis-a-vis 180 days for other companies. 11. Startup India Hub: The Government launched a Startup India Online Hub on 19th June 2017  which  is  one  of  its  kind  online  platform  for  all  stakeholders  of  the  entrepreneurial

ecosystem in India to discover, connect and engage with each other. The Online Hub hosts Startups, Investors, Funds, Mentors, Academic Institutions, Incubators, Accelerators, Corporates, Government Bodies and more. 12. Exemption for the Purpose Of Clause (VII)(b) of Sub-section (2) of Section 56 of the Act (2019): A  DPIIT recognized startup is eligible for exemption from the provisions of section 56(2)(viib) of the Income Tax Act. 13. Startup India Showcase: Startup India Showcase is an online discovery platform for the most  promising  startups  of  the  country  chosen  through  various  programs  for  startups exhibited  in  a  form  of  virtual  profiles.  The  startups  showcased  on  the  platform  have distinctly emerged as the best in their fields. These innovations span across various cuttingedge  sectors  such  as  Fintech,  EntrepriseTech,  Social  Impact,  HealthTech,  EdTech,  among others. These startups are solving critical problems and have shown exceptional innovation in  their  respective  sectors.  Ecosystem  stakeholders  have  nurtured  and  supported  these startups, thereby validating their presence on this platform. 14. National Startup Advisory Council: The Government  in January 2020 notified constitution  of  the  National  Startup  Advisory  Council  to  advise  the  Government  on measures needed to build a strong ecosystem for nurturing innovation and startups in the country  to  drive  sustainable  economic  growth  and  generate  large  scale  employment opportunities.  Besides  the  ex-officio  members,  the  council  has  a  number  of  non-official members, representing various stakeholders from the startup ecosystem. 15. Startup India: The Way Ahead: Startup India: The Way Ahead at 5 years celebration of Startup  India  was  unveiled  on  16th  January  2021  which  includes  actionable  plans  for promotion of ease of doing business for startups, greater role of technology in executing various  reforms,  building  capacities  of  stakeholders  and  enabling  a  digital  Aatmanirbhar Bharat. 16.  Startup  India  Seed  Fund  Scheme  (SISFS): Easy  availability  of  capital  is  essential  for entrepreneurs at the early stages of growth of an enterprise. The capital required at this stage often presents a make-or-break situation for startups with good business ideas. The Scheme  aims  to  provide  financial  assistance  to  startups  for  proof  of  concept,  prototype development, product trials, market entry and commercialization. Rs. 945 crore has been sanctioned under the SISFS Scheme for period of 4 years starting from 2021-22.

17. National Startup Awards (NSA): National Startup Awards is an initiative to recognize and reward outstanding startups and ecosystem enablers that are building innovative products or  solutions  and  scalable  enterprises,  with  high  potential  of  employment  generation  or wealth creation, demonstrating measurable social impact. Handholding support is provided to  all  the  finalists  across  various  tracks  viz.  Investor  Connect,  Mentorship,  Corporate Connect,  Government  Connect,  International  Market  Access,  Regulatory  Support,  Startup Champions on Doordarshan and Startup India Showcase, etc. 18. States'  Startup  Ranking  Framework  (SRF): States'  Startup  Ranking  Framework  is  a unique  initiative  to  harness  strength  of  competitive  federalism  and  create  a  flourishing startup  ecosystem  in  the  country.  The  major  objectives  of  the  ranking  exercise  are facilitating  states  to  identify,  learn  and  replace  good  practices,  highlighting  the  policy intervention  by  states  for  promoting  startup  ecosystem  and  fostering  competitiveness among states. 19. Startup Champions on Doordarshan: Startup Champions program on Doordarshan is a one-hour weekly program covering stories of award winning/ nationally recognised startups. It is telecasted in both Hindi and English across Doordarshan network channels. 20.  Startup  India  Innovation  Week: The  Government  organises  Startup  India  Innovation week around the National Startup Day i.e., 16th January, with the primary goal was to bring together the country's key startups, entrepreneurs, investors, incubators, funding entities, banks, policymakers, and other national/international stakeholders to celebrate entrepreneurship and promote innovation. 21.  The  Startup  India  Investor  Connect  Portal has  been  co-developed  under  the  Startup India  Initiative  with  SIDBI,  serving  as  an  intermediary  platform  that  links  startups  and investors in order to help entrepreneurs from various industries, functions, stages, regions, and backgrounds in mobilizing capital. The portal has been built with the aim to enable in particular; early-stage startups located anywhere in the country to showcase themselves to leading investors/ venture capital funds. Currently, 82 Alternative Investment Funds (AIFs) and more than 1,900 startups have already registered on the platform. 22. National Mentorship Portal (MAARG): In order to facilitate accessibility to mentorship for startups in every part of the country, the Mentorship, Advisory, Assistance, Resilience, and Growth (MAARG) program has been developed and launched under the Startup India Initiative. 23.  ASCEND: Under  ASCEND  (Accelerating  Startup  Caliber &  Entrepreneurial  Drive), sensitization  workshops  on  startups  and  entrepreneurship  were  conducted  for  all  eight North  Eastern  States  with  the  objective  to  capacitate  and  augment  knowledge  on  key aspects  of  entrepreneurship  and  continue  efforts  towards  creating  a  robust  startup ecosystem in these States. 24.  Startup20  Engagement  Group: As  a  result  of  India's  belief  in  start up  ecosystem,  a Startup20 Engagement Group under India's G20 Presidency has been institutionalised which is  working  towards  harmonisation  and  cross  collaboration  amongst  the  largest  global economies.  The  engagement  group  acts  as  the  voice  of  the  global  startup  ecosystem bringing together varied stakeholders on a common platform. The group aims to support startups by enabling synergies between startups, corporates, investors, innovation agencies and other key ecosystem stakeholders internationally and to create global synergies.

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## Annexure-II refer to in reply to Part - (a) to (b) of Lok Sabha Un-Starred Question No. 2962 for answer on 07.08.2023

## ANNEXURE-II

## Key Initiatives undertaken by the Government for the Fintech Ecosystem in India are as under:

1. Jan Dhan Yojana has been targeted at increasing financial inclusion in India by helping in new bank account enrollment of beneficiaries for direct benefits transfer and accessibility to a  host  of  financial  services  applications.  This  has  enabled  Fintech  startups  to  build technology products to penetrate the large consumer base in India
2. India Stack is a societal initiative aimed at building public digital infrastructure to promote public and private digital initiatives including accelerated adoption of technology in finance.
3. Aadhar, the unique biometric identification system, has allowed Aadhar Enabled Payment System and Aadhar Payment Bridge System:
- Aadhar Enabled Payment System allows individuals to conduct financial transactions on a Micro-ATM by furnishing their Aadhaar number and verifying it with the help of their fingerprint/iris scan.
- Aadhar  Payment  Bridge  System allows  ease  in  bulk  and  recurring  Government benefits  and  subsidy  payments,  facilitating  operations  from  Aadhaar-linked  bank accounts, using the biometric authentication.
4. Development and roll-out of authentication solutions including digital KYC, video-based customer  identification  process,  and  digital  signature  on  documents has  created various  safeguards  and  a  hassle-free  system  for  Fintech  startups  and  customers  to leverage the technology-enabled solutions in the sector.
- A central repository, Central KYC ,  has  been developed for reducing the hassle of undergoing  multiple  KYCs  for  different  financial  institutions.  This  allows  the  KYC process of consumers to be conducted only once unless there are any changes in consumer details.
- KYC  and  customer  on  boarding  costs  have  been  reduced  significantly  enabling expansion of financial services to rural India and opening their accounts.

5 . Unified  Payments  Interface has  been  built  as  a  scalable  payments  platform supporting digital payments in India. 6. License for Payments Banks has  further helped in enhancing the financial inclusion drive  in  the  country  by  allowing  the  setting-up  of  payments  banks  and  expanding the access to payments/remittance services. In a bid to promote digital payments banks in the  country,  RBI  has  announced  an  increase  to  the  maximum  end  of  day  balance  for payment banks to Rs. 2 lakh. 7. National Automated Clearing House System has  been successfully used for making bulk transactions. 8. Bharat Bill Payment System has helped in enhancing consumer convenience to pay bills across utilities and other segments and has been expanded to include all categories of  billers  who  raise  recurring  bills  (except  prepaid  recharges)  as  eligible  participants, voluntarily. 9. RBI has also developed a Payments Infrastructure Development Fund (PIDF) scheme to subsidise deployment of payment acceptance infrastructure in tier-3 to tier-6 centres. 10. The  RBI has created a regulatory framework around Peer-to-Peer (P2P) lending by recognising P2P lenders as Non-Banking Financial Companies (NBFCs) ,  thus  providing alternative credit access to the unbanked. 11. IRDAI has undertaken various initiatives towards boosting the insurance penetration, such  as  permitting  insurers  to  conduct  video-based  KYC,  launching  standardized insurance products and allowing insurers to offer rewards for low-risk behaviour. · Government institutions such  as  the  Health ministry  and  the  NITI  Aayog  are also supporting  the  transformation  in  the  insurance  industry through  the  National Digital  Health  Mission  (NDHM),  the  Digital  Information  Security  in  Healthcare  Act (DISHA) and the National Health Stack. 12. A world-class Fintech hub has been developed at the International Financial Services Centre  (IFSC), GIFT  City in  Gandhinagar,  Gujarat  to  further  strengthen  the  vision  of making India a global Fintech hub.

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