The Government of India (“GOI”) has operationalized approximately USD 12 billion (INR 1 Lakh Crore) Research, Development, and Innovation (RDI) Fund, releasing detailed Implementation Guidelines (“Guidelines”) and a Notice Inviting Applications (“NIA”) for Fund Managers on November 03, 2025.1 The NIA invites applications by Fund Managers to receive contributions from the GOI as a Limited Partner (“LP”) at attractive economics by December 15, 2025.
Background of The RDI Scheme
The GOI has established the Research Development and Innovation (“RDI”) Fund (“RDIF”) as a flagship initiative with a corpus of approximately USD 12 billion (INR 1 Lakh Crore) to be utilized over six years. The fund is set up as a Special Purpose Fund (“SPF”) under the Anusandhan National Research Foundation (“ANRF”).
The primary objective is to de-risk and encourage private sector investment in India's RDI ecosystem. To achieve strategic autonomy and global competitiveness, India aims to rank among the top three (3) to five (5) nations in five (5) to ten (10) key technology areas. The GOI aims to boost India's private R&D investment, which currently stands at only 36.4% of the country's total R&D expenditure (which itself is a low 0.64% of GDP).
The GOI has now released detailed Guidelines and an NIA for Fund Managers, setting the stage for capital deployment.
Key Features of The RDI Scheme
The guidelines establish a comprehensive framework for the fund's deployment, defining the flow of capital and the strict eligibility criteria for all participants.
1. The Two-Tiered Funding Structure
The scheme operates on a two-tiered fund manager model:
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Tier 1: First Level Fund Manager (“FLFM”): The RDIF itself, established as an Independent Business Unit (IBU) under the ANRF, acts as the custodian and primary manager of the fund.
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Tier 2: Second Level Fund Managers (“SLFMs”):The FLFM will channel funds to SLFMs, which will be the primary entities investing in companies. Eligible SLFMs include:
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Alternative Investment Funds (“AIFs”), including Fund of Funds.
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Development Finance Institutions. (DFIs)
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Non-Banking Finance Companies. (NBFCs)
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Focused Research Organizations. (FROs)
2. Eligibility for the Ultimate Beneficiaries
The ultimate recipients of the RDIF Funds provided by the SLFMs must be exclusively Eligible Technology Entities(“ETEs”) at the time of investment, which are subject to specific criteria. This includes, amongst others, the following:
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Definition of ETEs in Brief: Must be a legal entity registered in India engaged in developing RDI-intensive technologies at Technology Readiness Level (TRL) 4 or higher.
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Strategic Sectors: Must operate in RDIF Priority Sectors, which include energy security, deep tech (e.g., quantum, robotics, space), AI, biotechnology, and other sectors of strategic importance.
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The Control Mandate: The ETE must be under the ‘control’ of ‘resident Indian citizens’. The guidelines explicitly adopt the definition of ‘control’ and ‘resident Indian citizens’ from the Consolidated FDI Policy 2020.
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The Headquarters Mandate: The ETE must have its registered global headquarters in India.
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The IPR Mandate: ETEs receiving RDI funds must, for all Intellectual Property Rights (“IPRs”), register such IPR in India and retain ownership of such IPR for its term under applicable Indian law.
3. Funding Parameters for the Ultimate Beneficiaries
The RDIF will provide financing (not grants) with the following aspects:
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Investment Streams: Funds from RDIF to SLFMs will be either in the form of (a) loan financing, or (b) investing via contribution to AIFs, including Fund of Funds.
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Funding Limit: RDIF funding (via the SLFM) is limited to not more than 50% of the total assessed project cost. For ETEs receiving equity funding, this is calculated as 50% of each funding round.
4. Playbook for Fund Managers
A. Funding Modalities
The funding parameters shall be decided by the Executive Council from time to time. Illustrative examples provided in the Guidelines for AIFsreceiving contributions from RDIFare as follows:
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Mode 1 (Senior Tranche): RDIF accepts a lower hurdle rate in exchange for a higher priority in the distributions.
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Mode 2 (Pari Passu): RDIF receives the same hurdle rate and receives distributions pari passu with other contributors.
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Mode 3 (Junior/First-Loss Tranche): RDIF receives a higher hurdle rate in exchange for a lower priority in distribution.
B. Selection Process
SLFMs will be chosen via a Quality and Cost-Based Selection (“QCBS”) method. The key aspects of QCBS with respect to Fund Managers are as follows:
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Weightage: The selection process is heavily skewed towards excellence, with 80% weightage for Quality and 20% for Cost.
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Quality:This is the dominant factor. Applicants will be evaluated on:
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General Competence: The fund management team's caliber and operational risk management.
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Demonstrated Track Record: Demonstrated success of prior funds.
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R&D/RDI-Intensive Technology Focus: Alignment of the investment thesis with RDIF's priority sectors and TRL 4+ mandate.
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Crowd In: The SLFM's ability to raise private capital alongside the RDIF contribution.
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Cost:This is where AIFs compete on management fees and carried interest.
NDA Comments
The RDI scheme represents a pivotal moment, signaling the GOI’s shift from providing simple grants to acting as a sophisticated, strategic investor. For fund managers, it presents a unique opportunity to raise capital with GOI’s backing on flexible terms. For innovators, it offers a new source of patient, long-term capital, provided they can navigate the specific requirements such as the ‘control’, ‘global HQ’, and ’IPR’ mandates.
However, the release of the NIA (Notice Inviting Applications) also marks the beginning of a critical consultation period. The NIA outlines a formal schedule for stakeholder feedback or clarification period till the end of November 2025.
This is an invitation by the GOI for the private sector to help refine this landmark policy. We strongly encourage fund managers, innovators, and industry bodies to comprehensively review the Guidelines, particularly the complex operational and eligibility rules, and provide constructive feedback through these official channels. Proactive engagement now is crucial to ensuring this policy achieves its ambitious goal of fostering a world-class, research-driven landscape in India.
Nishith Desai Associates (NDA) is the Global Strategic Legal Advisor to the India Deep Tech Investment Alliance (IDTA), a coalition of leading U.S. and Indian fund investors. IDTA is working with the Government of India to resolve regulatory complexities, mobilize private capital, and build scalable deep-tech enterprises in India. NDA’s strategic legal counsel enables IDTA to strengthen the U.S.-India deep-tech corridor and drive collaborative innovation.
Press Release
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Authors
NDA Team
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1Available at https://rdifund.anrf.gov.in.