How to get venture capital for starting your business in India?

Industrial Development Bank of India (IDBI):

IDBI was established in the year 1964 with the objective of promotion of small scale industries and entrepreneurship. This institution had played a special role for industrial development.


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It primarily provides assistance to small scale industries through refinance of industrial loan granted by Small Industries Development Corporation (SIDC) and State Financial Corporations (SFCs) and State Financial Corporations (SFCs). The following are primary objectives and functions of IDBI:

  • It is regarded as an apex body with regard to term finance.
  • It extends technical and administrative support for promotion, management and administration of industries.
  • It undertakes various market and investment research in connection with development of industry.
  • It co-ordinates other financial institutions which are engaged for financing and developing of industries.


Industrial Finance Corporation of India (IFCI):

IFCU was established in the year 1948 with the broad objective of providing long-term finance to industries. It is regarded as oldest financial institution.

Various projects costing an outlay in excess of Rs. 300 lakhs are generally financed by IFCI. Project involving project cost less than Rs. 300 lakhs are financed by State Financial Corporations and SIDCs. The followings are regarded as broad objectives and functions of IFCI:

  • Long term financial assistance either in rupee of foreign exchange is available.
  • It acts as an underwriter with regard to issue of equity share, preference share and debentures.
  • Its financial assistance is available for setting up new industrial projects.
  • Its financial assistance is also available for modernization, expansion renovation and diversification of existing projects.
  • It has instituted consultancy fee subsidy scheme.
  • It has also instituted interest subsidy scheme for unemployed youths.

Industrial Credit and Investment Corporation of India (ICICI)


ICICI was set up in the year 1955. It is a private sector development bank. Its primary objective is to extend financial assistance in the process of creation, expansion and modernization of industrial enterprises in private sector. The followings are broad objectives and functions of ICICI.

  • It not only grants loans to industries but also encourage others to invest.
  • Provide financial assistance through underwriting of public and private issues.
  • Provides financial assistance through direct subscription of shares and debentures.
  • It extends long-term rupee as well as foreign currency loans.
  • It also provides long-term and medium term loans to new enterprise.
  • It provides long-term loan for expansion and modernization of existing units.

State Financial Corporation (SFC):

SFC is a state level financial institution for furtherance of industrial development in the State. State Financial Corporations were set up in 18 states under SFCs Act 1951.

The primary objective of SFC is to provide financial assistance to small and medium scale units. It was set up in joint venture scheme of State Government and IDBI.


It also obtains refinance facility from IDBI and SIDBI. Most of SFCs provide financial assistance in the following manner.

  • It extends long-term finance to industrial units set up under proprietorship, partnership, company and co-operative form.
  • It extends financial assistance through direct subscription of share / debentures.
  • Provides financial assistance to technically qualified entrepreneurs.
  • It extends financial assistance for modernization expansion and up-gradation of technology.
  • It undertakes various product development programmes and recommend to entrepreneurs interested.
  • It undertakes establishment of industrial estates for entrepreneurs.
  • It determines import quotas and participates in all activities related to industrial development.
  • Provide financial assistance for rehabilitation of sick units.

State Industrial Development Corporation (SIDC):

These organizations were set up in different states as a wholly owned undertaking of the state government. It is registered under Indian Companies Act, 1956. Its primary objective is promoting industrial development in the state. The followings are some of major functions of SIDCs:

  • It provides term loans to all industrial units.
  • It underwrites shares and debentures issued.
  • It also directly subscribes shares and debentures of industrial units.
  • It undertakes setting up industrial units under joint venture scheme.
  • It prepares project reports of different projects for new entrepreneurs.
  • It conducts market survey and motivates private entrepreneurs to set up industrial units.
  • It provides infrastructure facility for industrial units.

There are 28 SIDCs in our country. In small states like Manipur, Goa and Sikkim SIDCs also discharge the functions of SFCs.

Small Scale Industries and Impact of New Policy 1991:

Small scale industries have a significant place of pride in our economy because they possess high potential in generation of employment, dispersal from rural to semi-urban, promoting entrepreneurship and earning of large foreign exchanges.

A small scale industry is one in which investment in fixed assets and plant and machinery, whether held on ownership or lease or hire purchase does not exceed rupees one crores.

Promotion of small scale units have been encouraged by the government because it facilitates rapid industrial growth. It also provides ample opportunities for development of new products and market.

By undertaking qualitative production it promotes healthy development of human resources. The followings are some of important characteristics of small scale industries.

  • It provides large scale employment opportunities.
  • It has high labour-capital ratio.
  • It has a shorter gestation period.
  • It requires very less investment in comparison to large scale industries.
  • It requires relatively a smaller market.
  • It encourages equitable distribution of national income.
  • Facilitates effective mobilization of resources.

Types of SSI:

Small scale industries are mainly classified into the following broad divisions:

Cottage Industry:

Initially cottage industries were started as domestic industries. Later on these were started on small scale set up to serve as a feeder unit to other industrial units. Cottage industries consist of traditional items like agriculture, khadi, handlooms and handicrafts.

These are operated mostly in rural areas either on full time or part time basis. These are mostly managed by skilled craftsmen or artisans. Cottage industries involving skilled workers require an investment of 25 lakhs and cottage industry involving artisans require an investment of Rs. one crores.

Village Industry:

Village industries consist of an artisan who undertakes small industrial activities in villages or towns not exceeding population 50,000 (As per 1981 census).

These industries use local raw materials and human skill and the individual credit requirement does not exceed a limit or Rs. 25,000.

Tiny Industries:

The industrial units located in villages or towns not exceeding population of 50,000 according to 1981 census. In these industries investment in plant and machinery does not exceed Rs. 25 lakhs. It provides all industrial related services and small business enterprises.

Ancillary Industry:

It denotes a type of industrial unit which is engaged in the production of spare parts, components, sub-assemblies and tools. Investment in plant and machinery whether on ownership or lease does not exceed rupees one crores.

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