The government has been taking a lot of steps to further startup interests of country’s entrepreneurs in the spirit of its flagship startup initiative, “Startup India, Standup India” . It recently approved establishment of an INR 10K cr startup funds of funds while also doing with angel tax for investors funding startups. Click here to know more.
Next in the series is the Reserve Bank of India‘s initiative to allow all startups having foreign operations to open foreign currency accounts abroad to credit foreign exchange earnings from exports and sales made by them.
However, RBI has added that the balances in these accounts which represents exports should be returned to India.
RBI added that Indian startups earning payments in foreign exchange on account of sales or exports will will allowed to credit the amount in the Exchange Earners Foreign Currency (EEFC) account maintained in India by the start-up.
And the benefits do not stop at startups.
Any any insurance or reinsurance company registered with the Insurance Regulatory and Development Authority (IRDA) of India will also be allowed to open a foreign currency account with a bank outside India to carry out insurance or reinsurance business. This facility was available to only LIC (Life Insurance Corporation of India) or GIC (General Insurance Corporation of India) and its subsidiaries until now.
The initiative is a part of RBI’s efforts to make the flow of funds smoother for startups by allowing them to get foreign venture capital without any curbs and enable easier transfer of shares between residents or non-resident investors. The then RBI Governor Raghuram Rajan also said the aim is to remove regulatory obstacles and simplify movement of capital to create more ‘unicorns’ or companies with billion-dollar valuations.