Budget 2025: Government Allocates Rs 10,000 Crore To SIDBI Fund Of Funds For Startups

In a boost to India’s startup ecosystem, the government in the union budget 2025-26 has allocated an additional Rs 10,000 crore corpus to the Small Industries Development Bank of Indi Fund of Funds for Startups. 

This is an addition to the previous constitution Rs 10,000 crore to the corpus. The government has also received a commitment of Rs 91,000 crore for the alternate investment fund for startups. 

“The alternate investment fund for startups have received commitments of more than Rs 91,000 crore. These are supported by the fund of funds set up with the government of India's contribution of Rs 10,000 crore, now a new fund of funds with expanded scope and a fresh contribution of another Rs 10,000 crore rupees will be set up,” Finance Minister Nirmala Sitharaman said in her budget speech on Feb.1. 

The SIDBI fund of funds is included in one of the government's Startup India initiative, which was introduced in January 2016. Under FFS, the scheme does not directly invest in startups, instead provides capital to SEBI-registered AIFs, known as daughter funds. These AIFs, in turn, invest money in growing Indian startups, through equity and equity-linked instruments. 

SIDBI has been given the mandate of operating this Fund through selection of suitable daughter funds and overseeing the disbursal of committed capital. AIFs supported under FFS are required to invest at least 2 times of the amount committed under FFS in startups.

As on Dec. 31 2022, under the Fund of Funds Scheme for startups, Rs 7,980 crore has been committed to 99 Alternative Investment Funds and Rs 3,400 crore has been disbursed to 72 AIFs, which have in turn made investments of Rs 14,077 crore in 791 startups. 

In early cheers to the move, Vivek Iyer, partner and financial services risk leader, Grant Thornton Bharat, said, “This initiative not only boosts capital but focuses on emerging sectors like agritech, clean energy, and healthcare, aligning with global trends in sustainability and technology. By supporting the entire innovation value chain, it ensures startups are not just funded but positioned for global leadership.”

The government is also enhancing credit availability for startups with guarantee cover. The credit guarantee cover for startups will be enhanced from 10 crore to 20 crore, with the guarantee fee being moderated to 1% for loans in 27 focus sectors important for Atmanirbhar Bharat.

The government will also explore deep tech fund of funds to catalyse the next generation of startups, the FM said in her speech. This will be done under initiative, which focuses on implementation of private sector-driven research development and innovation announced in the July budget. The FM has now allocated Rs 20,000 crore for the purpose.

The Finance Minister in her budget speech also mentioned extension of incorporation of startups. The budget has proposed to extend the benefit provided under Section 80-IAC to startups for another period of five years. The benefit will be available to eligible start-ups incorporated before April 1, 2030. “We continue to support the Indian startup ecosystem,” the FM said. 

“The proposal is a welcome move. The benefit will now be allowed to start-ups incorporated before April 1, 2030. This move is contrary to the government's proposals in yester years, which extended the incorporation period only by one year on a year-on-year basis, providing very little window for start-ups to become operational. A breather of five years extension will help start-ups to idealise and formalise their businesses,” said Sandeep Jhunjhunwala, partner, Nangia Andersen LLP, reacting to the announcement.