Lok Sabha Question No. 1765 (UNSTARRED), answered on 2023-12-13
Subject: Promoting Fintech Startups
Ministry: COMMERCE AND INDUSTRY
Asked by: Satyadev Pachauri, Pushpendra Singh Chandel

## GOVERNMENT OF INDIA MINISTRY OF COMMERCE & INDUSTRY DEPARTMENT FOR PROMOTION OF INDUSTRY AND INTERNAL TRADE

## LOK SABHA

## UNSTARRED QUESTION NO. 1765. TO BE ANSWERED ON WEDNESDAY, THE 13 TH  DECEMBER, 2023.

## PROMOTING FINTECH STARTUPS

## 1765.  SHRI SATYADEV PACHAURI: SHRI KUNWAR PUSHPENDRA SINGH CHANDEL:

Will the Minister of COMMERCE AND INDUSTRY be pleased to state: वाणिज्य एवं उद्योग मंत्री

- (a) the steps taken by the Government to encourage and incentivise the growth of the startup ecosystem in the country;
- (b) whether there has been a significant increase in the number of startups and unicorns in the country since 2014, and if so, the details thereof;
- (c) the details of specific startups that have demonstrated notable growth in India; and
- (d) the details of the steps taken by the Ministry to promote fintech startups in India?

## ANSWER

## वाणिज्य एवं उद्योग मंत्रालय में राज्य मंत्री ( श्री सोम प्रकाश ) THE MINISTER OF STATE IN THE MINISTRY OF COMMERCE & INDUSTRY (SHRI SOM PARKASH)

- (a): The  Government  with  an  intent  to  build  a  strong  ecosystem  for  nurturing innovation, startups and encouraging investments in startup ecosystem of the country launched the Startup India initiative on 16th January 2016.

In order to meet these objectives, the Government unveiled a Startup India Action  Plan  comprising  of  schemes  and  incentives  envisaged  to  create  a vibrant  startup  ecosystem  in  the  country.  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'.  For  attaining  specific  objectives  of  the  Action  Plan,  various schemes and programs are being implemented by the Government. Details of these programs are placed as Annexure-I .

- (b) & (c): Sustained  efforts  of  DPIIT  under  the  Startup  India  initiative  (which  was launched in 2016) have led to an increase in the number of recognised startups from over 300 in 2016 to 1,14,902 in 2023 as on 31 st     October 2023. Under various programs of Startup India initiative as listed in Annexure-I ,  notable startups are recognised and promoted as per program specific guidelines and criteria.  The  data  relating  to  number  of  startups  that have turned unicorns is not centrally maintained by the Government.
- (d): The  Government  has  undertaken  various  efforts  to  promote  startups  in  the country  across  multiple  sectors  including  startups  engaged  in  the  finance technology  (fintech)  sector.  The  details  of  such  initiatives  are  placed  as Annexure-I .  As  a  result,  there  are  3,578  DPIIT  recognized  startups  in  the fintech sector as on 31 st  October 2023.

Additionally,  the  Government  has  taken  measures  to  develop  and  regulate financial  services,  financial  institutions  and  financial  products  through  the International Financial Services Centres Authority (IFSCA). The Government has  also  undertaken  other  measures  to  promote  fintech  in  India  though Pradhan Mantri Jan Dhan Yojana (PMJDY), Aadhar and Mobile (JAM trinity) along with Unified Payments Interface (UPI) and other programs.

Details of these key initiatives undertaken by the Government for the fintech ecosystem in India are placed as Annexure-II .

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## ANNEXURE-I

## ANNEXURE REFERRED TO IN REPLY TO PARTS (a) TO (d) OF THE LOK SABHA UNSTARRED QUESTION NO. 1765 FOR ANSWER ON 13.12.2023.

The  details  of  various  programs  undertaken  by  the  Government  to  promote startups under Startup India initiative 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. 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.
3. 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.
4. 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.
5. 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.
6. Regulatory Reforms: Over 55 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.
7. 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)  also facilitates and promotes procurement of products and services by the Government from startups.
8. Self-Certification under Labour and Environmental laws: Startups are allowed to self-certify their compliance under 9 Labour and 3 Environment laws for a period of 3 to 5 years from the date of incorporation.
9. 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 Inter-Ministerial Board Certificate are exempted from income-tax for a period of 3 consecutive years out of 10 years since incorporation.
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. 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.
12. Support  for  Intellectual  Property  Protection: Startups  are  eligible  for  fasttracked 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.
13. 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.
14. 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 20 countries that provides a soft-landing platform for startups from the partner nations and aid in promoting cross collaboration.

15. 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  cutting-edge  sectors  such  as  Fintech,  EnterpriseTech,  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.
16. 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.
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. 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.
22. 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.
23. 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.
24. MeitY  Start-up  Hub  (MSH): A  nodal  entity  to  interconnect  deep  tech  startup infrastructure  pan  India  a  'MeitY  Start-up  Hub'  (MSH)  has  been  set  up  under Ministry  of  Electronics  &  Information  Technology  (MeitY).  MSH  is  assisting incubators and startups improving their scalability, market outreach, etc. and has also  established  partnerships  with  various  stakeholders  paving  the  way  for  an economy built on innovation and technological advancement.
25. TIDE  2.0  Scheme: Technology  Incubation  and  Development  of  Entrepreneurs (TIDE 2.0) Scheme was initiated in the year 2019 to promote tech entrepreneurship through financial and technical support to incubators engaged in supporting ICT startups using emerging technologies such as IoT, AI, Block-chain, Robotics etc. The Scheme is being implemented through 51 incubators through a three-tiered structure with an overarching objective to promote incubation activities at institutes of higher learning and premier R&D organisations .
26. Domain specific Centres of Excellence : MeitY has operationalised 26 Centres of Excellence (CoEs) in diverse areas of national interest for driving self-sufficiency and creating capabilities to capture new and emerging technology areas. These domain specific CoEs act as enablers and aid in making India an innovation hub in emerging through democratisation of innovation and realisation of prototypes.
27. Biotechnology Industry Research Assistance Council (BIRAC) :  An industryacademia interface agency of Department of Biotechnology, Ministry of Science &

Technology is supporting biotech startups in all biotech sectors including clean energy and emerging technologies. Project based funding is provided to startups and  companies  for  product/technology  development  under  its's  key  Schemes including  Biotech  Ignition  Grant  (BIG),  Small  Business  Innovation  Research Initiative  (SBIRI)  and  Biotechnology  Industry  Partnership  Programme  (BIPP). Incubation  support  to  the  startups  and  companies  is  also  provided  through Bioincubators  Nurturing  Entrepreneurship  for  Scaling  Technologies  (BioNEST) Scheme.

28. SAMRIDH Scheme : MeitY has launched the 'Start-up Accelerator Programme of MeitY for Product Innovation, Development and Growth (SAMRIDH)' with an aim to  support  existing  and  upcoming  Accelerators  to  further  select  and  accelerate potential software product based startups to scale.
29. Next  Generation  Incubation  Scheme  (NGIS ):  NGIS  has  been  approved  to support  software  product  ecosystem  and  to  address  a  significant  portion  of National Policy on Software Product (NPSP) 2019.
30. Support for International Patent Protection in E&IT (SIP-EIT) Scheme : MeitY had initiated a scheme titled 'Support for International Patent Protection in E&IT (SIP-EIT) that encourages international patent filing by Indian MSMEs and startups so as to encourage innovation and recognize the value and capabilities of global IP. Reimbursement provided under the scheme is up to a maximum of Rs. 15 lakhs per  invention  or  50%  of  the  total  expenses  incurred  in  filing  and  processing  of patent application up to grant whichever is lesser.
31. North-East Region Entrepreneurship & Startup Summit (NERES) : Ministry of Skill Development and Entrepreneurship organised NERES, an entrepreneurship and startup summit aimed at offering a platform to promising startups and aspiring entrepreneurs  across  North-East  Region  (NER).  The  objective  of  NERES  was aimed at stirring up entrepreneurial minds across the NER states and promotes startup entrepreneurs by offering them a platform to pitch their business ideas and also  addressing  various  challenges  faced  by  the  startups.  The  programme provided a platform for aspiring and existing entrepreneurs/startups to participate and showcase their business ideas and plan. It also helped them to learn more about the good practices and network with fellow startups. The programme has paved the way for startups and entrepreneur to seek support from mentors and an ecosystem that support their business growth.
32. Atal Innovation Mission: The Atal Innovation Mission (AIM) is a flagship initiative of the Government, set up by NITI Aayog to promote innovation and entrepreneurship  across  the  length and  breadth  of the  country.  AIM  has established  Atal  Tinkering  Labs  (ATLs)  with  the  objective  of  fostering  curiosity, creativity and imagination in young minds and inculcate skills such as design mindset, computational thinking, adaptive learning, physical computing, rapid calculations, measurements etc.
33. National  Initiative  for  Developing  and  Harnessing  Innovations  (NIDHI): Department  of  Science  and  Technology  (DST)  had  launched  an  umbrella programme called National Initiative for Developing and Harnessing Innovations (NIDHI)  in  2016  for  nurturing  ideas  and  innovations  (knowledge-based  and technology-driven) into successful startups.
34. Innovations  for  Defence  Excellence  (iDEX): iDEX  was  launched  by  the Department of Defense Production, Ministry of Defense, to achieve self-reliance and foster innovation and technology development in Defense and Aerospace by engaging industries such as MSMEs and startups, R&D institutes and academia and providing grants to carry out R&D.

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## ANNEXURE-II

## ANNEXURE  REFERRED  TO  IN  REPLY  TO  PART  (d)  OF  THE  LOK  SABHA UNSTARRED QUESTION NO. 1765 FOR ANSWER ON 13.12.2023.

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

1. 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.
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 :
4.  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 .
5.  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, videobased 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.
7.  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.
8.  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 is  a  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 .
6. International  Financial  Services  Centres  Authority  (IFSCA) measures:  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.

7. 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 ccess 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.
8. National Automated Clearing House System has been successfully used for making bulk transactions.
9. 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 .
10.  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.
11.  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.
12. 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.
7.  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.
13.  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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