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Lending to IT industry put on priority

These are part of sweeping policy changes for the information technology sector that are to be announced within the next fortnight.

T O D A Y

• Re 1/- only • Loans to get easier

The government has published these decisions in the gazettes and some of them have an August 15 deadline.

The initiative is in line with the government's agenda to promote the IT sector. The priority was first spelt out by Finance Minister Yashwant Sinha when he intervened in the Lok Sabha's budget debate.

The Reserve Bank of India will announce one financial package before August 15. It will put lending to the IT sector on priority for the next five years. The lending, to be monitored by the finance ministry, will allow concessions in refinance to commercial banks.

The RBI will also announce a lending criteria based on turnover for working capital in the IT sector.

Banks will soon be advised to lend 25 per cent of the contract value for 18 months. Here too, the first six months could be a term loan without collateral. And from the seventh month onwards, banks could accept annualised cash flow statements instead of collateral.

Further, commercial banks would be allowed to invest in dedicate venture capital funds. This would be forked out from the currently permitted corpus of 5 per cent of the incremental deposits of the previous year.

ICICI, IDBI, UTI and SBI would form joint ventures with Indian or foreign companies to form dedicated venture capital funds with an individual corpus of Rs 500 million.

The government will also make changes to the Companies Act to allow venture capital enterprises to issue sweat equity to promoter-directors, whole-time directors or employees.

The government has made clear its intention to encourage employee stock option schemes for stocks listed in India.

In addition, other announcements to be made include complete unshackling of Internet services in the country. This is expected to pave the way for hassle-free entry of private Internet service providers.

- Compiled from the Indian media

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