Lok Sabha Question No. 976 (UNSTARRED), answered on 2023-07-26
Subject: Fintech Start-ups
Ministry: COMMERCE AND INDUSTRY
Asked by: Jayant Sinha

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

## LOK SABHA

## UNSTARRED QUESTION NO. 976. TO BE ANSWERED ON WEDNESDAY, THE 26 TH , 2023.

## FINTECH START-UPS

## 976.   SHRI JAYANT SINHA:

Will the Minister of COMMERCE AND INDUSTRY be pleased to state:

## वाणिज्य एवं उद्योग मंत्री

- (a) the number of fintech start-ups in India;
- (b) the trends in capital funding and investment in this sector in the last five years; and
- (c) the detailed steps taken by the Ministry to promote the said sector?

## 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): 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 30 th  April 2023.

Furthermore, DPIIT has recognised startups which are spread across more than 56  diversified sectors. As on 30 th  April  2023, 3,085 recognised startups are engaged  in the finance technology (fintech) sector.

- (b): No such data is maintained centrally.
- (c): 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 .

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## ANNEXURE-I

## ANNEXURE  REFERRED  TO  IN  REPLY  TO  PART  (c)  OF  THE  LOK  SABHA UNSTARRED QUESTION NO. 976 FOR ANSWER ON 26.07.2023.

## 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 diff¬erent 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 self-certify 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 cutting-edge 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 startup 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

## ANNEXURE REFERRED TO IN REPLY TO PART (c) OF THE LOK SABHA UNSTARRED QUESTION NO. 976 FOR ANSWER ON 26.07.2023.

## 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:
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, 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.
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 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.
16.  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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