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Posted 16 Apr 2024

2 min read

  • Crowdfunding is solicitation of funds (small amount) from multiple investors through web-based platform or social networking site for specific project, business venture or social cause.
    • Traditional fundraising consists of asking for a sum from limited set of sources.
    • Securities and Exchange Board of India (SEBI) regulates Crowdfunding in India.

 

  • SEBI guidelines on Crowdfunding
    • Only “Accredited Investors” may invest i.e.
      • Companies incorporated under Companies Act, 2013 with minimum net worth of Rs 20 crore
      • High Net Worth Individual with minimum net worth of Rs 2 crore,
      • Eligible Retail Investors who have a minimum annual gross income of Rs. 10 Lacs.

 

  • Benefits of Crowdfunding 
    • Promoting funding to new ideas and encourages startups. 
    • Increases flows of credit to Small, Medium Enterprises.
    • Raising funds during natural calamities.
    • Arranging money for those poor people who can't afford expenses of diseases like cancer etc.

 

  • Risk of Crowdfunding
    • Retail investors may not be able to understand risk in investing start-ups and will be unable to bear loss of investments.
    • Possibility of genuine websites being used by fraudsters.
    • Lack of monitoring of web based platforms leads to risk like terror financing, money laundering etc. 

 

 

 

 

 

  • Tags :
  • Crowdfunding
  • SEBI guidelines on Crownfunding
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