Canara Bank has roped in five public sector banks and Sidbi (Small Industries Development Bank of India) to float the Bharat Nirman Fund that will promote entrepreneurship and provide impetus to manufacturing and services.
It will be the fourth fund floated by its subsidiary Canbank Venture Capital Fund (CVCF).
Set up with a corpus of Rs.550 million ($11.9 million), including seed capital from Allahabad Bank, Corporation Bank, India Overseas Bank, Oriental Bank of Commerce, Vijaya Bank and Sidbi, the new fund will have an eight-year maturity period.
Launching the fund here Monday, Canara Bank chairman M.B.N. Rao said it was the first time that six leading commercial banks and Sidbi had joined hands for such a venture.
"This is a maiden venture formed jointly to invest in emerging businesses across verticals spanning IT/ITES/BPO, telecom, biotechnology, healthcare, pharmaceuticals, engineering, automobile, textiles and infrastructure," Rao said.
"The average size of investments will range between Rs.50 million and Rs.100 million."
As the lead bank, Canara Bank has chipped in Rs.150 million for the fund, followed by Rs.100 million each from Oriental Bank and Vijaya Bank and Rs.50 million each from the remaining three banks and Sidbi.
"Venture funding has caught up with the banking industry, thanks to a burgeoning economy, favourable investment climate, increasing entrepreneurship and steady growth of businesses in diverse sectors," Rao said.
"Though public sector banks handle about 70 percent of total deposits and advances in the banking industry, their exposure to venture capital funding has been tardy. We want to narrow the gap and accelerate the growth of entrepreneurship.
"For instance, venture capital and private equity funds invested $1.3 billion (Rs.57.85 billion) during the first nine months of this calendar year as against $1.1 billion (Rs.48.95 billion) last year and $774 million (Rs.34.43 billion) in 2003."
According to Nasscom (National Association Of Software and Service Companies), the representative body of Indian IT firms, venture capital investment in the country is estimated to rise to a whopping $11.1 billion (Rs.493.95 billion) by 2008.
"Higher returns and emerging opportunities will give a fillip to the investment climate in the country, given the robust economy, healthy stock market and rising domestic demand. The Bharat Nirman Fund is an initiative we have taken up at the instance of the World Bank," Rao said.
As India's first and only public sector bank-sponsored venture capital fund, CVCF had earlier floated three venture capital funds with an aggregate corpus of Rs.570 million and assisted about 60 companies across verticals.
The fund exited 41 firms with good returns. CVCF is also the first fund to have been awarded ISO 9001:2000 certification.
With a thrust on manufacturing and services, the Bharat Nirman Fund will be operated by CVCF under the guidelines of Sidbi.