Underscoring the need to boost the start-up ecosystem, the RBI today said it will simplify rules and regulations which impede their growth and ensure that an entrepreneur does not have to run from "pillar to post" to start a business.
"We want to simplify the process...we are supporting the start-up process by making it easier to raise money, often from abroad, but also simplify the compliance with regulations, including putting lot of forms online so that they don't have to go from pillar to post," RBI Governor Raghuram Rajan said.
He cited the difficulties faced by entrepreneurs, starting right from the complicated contracts for fund raising, which are not allowed under the Foreign Exchange Management Act.
"Can we make it possible for those contracts to actually be undertaken?
"There have been a variety of cases when the entrepreneurs have come to us and told us that they want some relaxations," he said, adding the changes will be incorporated into policymaking, starting with a document to be released shortly.
He also spoke of the difficulties faced by an entrepreneur during the sale of a company which entails an elongated period of receiving the funds.
"During that time, the amount is escrowed. Can we extend the time for which the amount is escrowed so that sales can take place easily," Rajan said.
In a statement issued later, the RBI said in case of transfer of ownership of a start-up, the escrow arrangement can be extended till 18 months.
It will also work for enabling start-up enterprises to receive foreign venture capital investment and also "explicitly enabling transfer of shares from foreign venture capital investors" to others, the statement said.
It will also look at the issuance of innovative FDI instruments like convertible notes by start-ups and streamlining their overseas investment operations.
In the sixth bi-monthly policy statement, Rajan said the measures will create an enabling framework "for receiving foreign venture capital, differing contractual structures embedded in investment instruments, deferring receipt of considerations for transfer of ownership, facilities for escrow arrangements and simplification of documentation and reporting procedures".
Meanwhile, the RBI today left key rates like the repo rate and cash reserve ratio (CRR) unchanged. Putting the ball in the Finance Minister’s court, Rajan said the central bank would await more data on inflation and the Union Budget before taking action.
"The RBI continues to be accommodative even as it leaves the policy rate unchanged in this review, while awaiting further data on the development of inflation. Structural reforms in the forthcoming Union Budget that boost growth while controlling spending will create more space for monetary policy to support growth, while also ensuring that inflation remains on the projected path of 5% by the end of 2016-17," he said.
He said the RBI was set to meet the inflation target of 6% for January 2016. The RBI felt that inflation could fall to the targeted 5% by end of fiscal 2016-17 assuming that the monsoons would be normal and crude prices remained low.
