RDI Fund Row: Deeptech Investors Seek More Transparency, Independent Oversight

For India’s deeptech sector, the government’s deeptech-focused ₹1 Lakh Cr Research, Development and Innovation (RDI) fund was supposed to be a game changer. But ironically, instead of becoming a watershed moment for a patient-capital-starved sector, the fund’s first major allocation has raised several eyebrows over alleged links between its beneficiaries and members of its investment committee (IC).

The debate follows an Indian Express report that found 15 of the 22 companies that received ₹2,192 Cr in the first round had investment links with seven members of the 12-member IC. 

These 15 companies, including Tejas Networks, Ather Energy, Agnikul Cosmos, Dhruva Space and  BigEndian Semiconductors, accounted for more than ₹1,377 Cr, or roughly 62% of the amount approved in the round. The IC members have said that their interests were disclosed and that they recused themselves where required. The government has also maintained that there was no violation of the prescribed conflict-of-interest framework.

Inc42 reached out to the seven investors named in the report. Two of the investors declined to comment, highlighting that the claims of ‘conflict of interest’ have already been refuted by the government. The others are yet to respond. 

Meanwhile, we also spoke with several deeptech investors, fund managers and other ecosystem players on the issue. A common concern that ran amok was that the fund’s current architecture could end up favouring a select few well-established, deep-pocketed ventures, making it harder for new players to compete. 

The fund is designed as a two-tier structure, with the ₹1 Lakh Cr corpus housed in a special purpose fund under the Anusandhan National Research Foundation (ANRF), while implementation is routed through second-level fund managers such as the Technology Development Board (TDB), AIFs, DFIs, NBFCs and research organisations. 

Under the RDI framework, startups are eligible to receive funding if they qualify as Eligible Technology Entities (ETEs). These can be companies, partnerships or LLPs registered in India and engaged in developing RDI-intensive technologies at technology readiness level (TRL) 4 or above.

TDB’s eligibility criteria also require such entities to have their principal operations and registered global headquarters in India and be under the control of resident Indian citizens. The scheme is focused on sunrise and strategic areas including deeptech, AI, biotechnology, space, semiconductors, advanced manufacturing, energy and climate technologies.

The first round under scrutiny was governed by TDB’s 12-member IC comprising industry and technology professionals, with the TDB secretary Rajesh Pathak acting as a non-voting government representative, who evaluated applications from 124 private companies and cleared ₹2,192 Cr for 22 ventures. 

As per the government, the selection was merit-based, and conflicted members had “zero involvement” in the evaluation or sanction of the relevant proposals.

Nevertheless, the ‘conflict of interest’ disclosures have prompted investors to question whether prior disclosure and recusal alone are enough when industry participants are involved in allocating public capital.

The Network Effect

One emerging concern is that the government-backed fund could unintentionally favour established investors and companies that have strong relationships within the ecosystem.

A Bengaluru-based deeptech fund manager, speaking on condition of anonymity, alleged that the application process for the RDI fund was anything but transparent, with no formal announcement or callouts done for the ecosystem, leading many startups in his portfolio to miss out on the deadline to apply. 

This is especially important as the applications were processed on a first-come, first-served basis, making the first cohort concentrated within companies plugged well into the deeptech ecosystem. The second cohort of 13 companies reportedly had only one company with an IC-member link.

One founder, who has been building his startup in the robotics space for around a decade with TRL 9, said nobody in his circle of deeptech entrepreneurs knew that the application process had even started. He highlighted that the funds were critical for his future projects, which often take years to be commercially viable and need consistent backing to become successful. 

Similar concerns are being raised about the RDI’s FoF (fund of funds), which will disburse capital to eligible AIFs. Emerging managers are questioning whether they can compete on the strength of their investment thesis and track record alone when older funds have deeper pockets and stronger networks.

Multiple fund managers Inc42 spoke with also highlighted how their applications for the FoF were not considered for the first cohort due to their purported nascency. While the guidelines encouraged emerging fund managers to apply for the FoF, they were told internally that only experienced managers were being considered for the first cohort.

The government says there is no minimum fund size requirement for AIFs seeking RDI capital, and both early-stage and growth-stage funds can apply as long as their investment thesis aligns with the RDI framework. Fund managers are evaluated on factors including the experience and track record of their investment teams, ability to manage technology investments and risks, successful exits and scale-ups, ability to raise third-party capital, and the quality of their investment committee, advisory board and compliance systems. 

One Mumbai-based investor pointed to the difficulty of raising capital for newer funds due to apprehension from private sector investors, which makes the RDI fund even more critical. It acts not just as a source of capital but also as a signal that could bring more institutional backing.

If that critical access is concentrated among established players, investors fear it could reinforce the existing hierarchy rather than create a wider pool of capital for early-stage and emerging deeptech funds. 

Separating Expertise From Influence

The sharpest criticism is around the idea that disclosure and recusal alone can eliminate conflicts when other active industry participants are also involved in decisions on public capital.

The founding partner of a New Delhi-based early stage fund argued that an IC member may formally step away from a particular decision but still influence the broader committee through relationships, prior knowledge or informal interactions. 

In his view, someone who is simultaneously an active participant in the investment ecosystem and part of a committee allocating public money is effectively sitting on both sides of the table.

Their preferred model is therefore a structural separation: active investors could help the government formulate policy, define evaluation frameworks and provide technical or commercial inputs but should not participate in final decisions on capital deployment.

The government, however, has defended the existing model on the grounds that deeptech evaluation requires specialised expertise. According to its latest clarification, the framework was specifically designed to retain industry expertise while managing conflicts through disclosure, recusal, independent expert evaluation and supermajority approval. Members declaring a conflict are required to stay out of both discussions and voting on the concerned proposal.

The Push For Greater Transparency

For now, transparency is appearing to be a more immediate fix toward bringing trust back to the initiative. There are calls for the government to disclose the interests declared by IC members, the companies from which members recused themselves, the evaluation methodology and, where possible, the reasons behind allocation decisions.

Industry participants argue that such disclosures would make it easier for the wider ecosystem to understand why one company was selected over another.

One Mumbai-based emerging fund manager at a deeptech-focused AIF said an independent review of the allocation process could also help restore confidence, particularly if it establishes whether the prescribed safeguards were actually followed in every conflicted case.

This is important because the RDI Fund is designed to provide currently scarce patient, long-term financing for high-risk technologies at higher technology-readiness levels, while also using the fund-of-funds route to bring more private capital into deeptech.

However, some investors now fear that the controversy could have a chilling effect on the very ecosystem the RDI Fund was created to strengthen.

If founders believe access to public capital depends heavily on existing networks, they may become less willing to engage with government-backed programmes. For emerging fund managers, the concern is that a system designed to broaden the pool of capital could instead strengthen the incumbents.

One investor said the immediate damage could be to trust in the institution, rather than to any individual allocation. 

That matters because deeptech already operates on unusually long timelines. Companies developing semiconductors, space systems, robotics, advanced materials or biotech platforms can spend years moving from laboratory validation to commercial scale. The RDI Fund was created precisely because conventional private capital may not be willing to carry that risk for long enough.

A broader first cohort, with smaller allocations across more companies, could have allowed the government to support a larger pool of technologies and create more opportunities for new players, opined an investor. 

The Road Ahead For RDI

The consensus among the investors is that the RDI Fund is too important to be undermined by doubts over its governance.

Their preferred model broadly involves greater disclosure, independent oversight, a clearer evaluation methodology, stronger separation between policy advice and allocation decisions, and a more transparent pathway for emerging fund managers and startups.

The government says the fund already operates through a rule-based system involving independent experts, conflict disclosures, recusals and supermajority approvals. It also says public funding is linked to specific technology projects and matching private investment, rather than being a blanket financial benefit to companies.

For investors, the focus now shifts to how these safeguards are implemented in subsequent rounds, and whether the process becomes more transparent and accessible to a wider pool of deeptech startups and fund managers.

This week, 13 more companies recommended by the TBD in the second cohort are expected to receive final approval from the government. It is yet to be seen whether the pool has diversified beyond IC-linked companies in this cohort, especially as the government has maintained that no conflict-of-interest violation took place because prescribed safeguards were followed, and has not announced any overhaul in the existing process. 

Meanwhile, the Biotechnology Industry Research Assistance Council, another second-level fund manager for biotechnology and allied areas, launched its first national RDI call in February 2026. Investors expect the BIRAC cohort, along with FoF allocations, to put greater emphasis on documentation, disclosures and demonstrating that the rules were followed.

As one investor put it, the RDI Fund needs to ensure that public capital is not only allocated fairly, but is seen to be allocated fairly. With ₹1 Lakh Cr eventually at stake, that distinction could determine whether the scheme becomes a genuine catalyst for India’s deeptech ecosystem or a government funding programme that founders and investors approach with caution.

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