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In today’s newsletter: 

• RBI curse falls on Startup Inc, again
• Big Tech firms fear Telecom bill's overreach
• Red tape chokes Goa tourism

Programming note: Wishing all our readers a Merry Christmas! There will be no edition of MCTech3 on December 25 and we’ll be back in your inbox on Tuesday (December 26)!

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The central bank's tightening grip on the financial sector, which first squeezed fintechs, is now closing in on venture funds.

In a bid to crack down on banks and NBFCs potentially hiding their bad loans, the Reserve Bank of India (RBI) has unintentionally made life tougher for venture capital firms and startups.

So, what does it say?

• If a bank or NBFC gives a loan to a startup, they can't also invest in a VC fund that invests in the same startup

VCs argue that this could worsen the already precarious startup funding situation, which has already dropped by more than two-thirds this year.

India has traditionally faced a shortage of domestic capital flowing into local venture capital firms. 

• Nonetheless, there has been gradual improvement in the last 4-5 years, thanks to banks and family offices

However, the recent decision by the RBI poses a threat to the continuous flow of funds from banks to VC firms.

• At present, domestic VCs contribute to less than a third of the funding for startups, according to industry estimates

• The majority of the corpus for domestic VCs comes from contributions by foreign limited partners

Domestic funds might be forced to circumvent the new regulations through tax havens and jurisdictions like Mauritius, according to a venture capital investor who is also a fintech founder.

• Industry experts believe the biggest impact will be felt by SIDBI's fund of funds, which backs many venture funds across the country

Find out more

The Telecommunications Bill 2023 has cleared the Rajya Sabha and stands just a formality away from becoming law.

• However, industry concerns remain regarding specific provisions and keyword definitions, prompting calls for clarity on various aspects of the bill

The Asia Internet Coalition (AIC), an influential trade body representing major US Big Tech firms, including Apple, Amazon, Google, X (formerly Twitter), and Meta, has requested clarity from the Ministry of Communication regarding the broad definitions in the bill. 

• The coalition seeks assurance that the bill does not encompass internet services 

• Other members of the body include LinkedIn, Snap, Booking.com, among others

AIC acknowledged the government's "intention" to exclude over-the-top (OTT) and online applications from the scope of the bill. 

• However, it specifically requested clarity on the definitions of "message" and "telecommunications" as outlined in the bill

Also read: Meta is concerned that Indian govt could regulate internet apps with proposed telecom law

Signal Foundation, which runs the encrypted messaging platform Signal, teamed up with around 60 other organisations to urge the Indian government to withdraw the telecom bill. 

• Their primary concern is that the bill poses a significant threat to encryption

Former cabinet minister Subramanian Swamy said that he would challenge the telecom bill in the Supreme Court, as it allegedly legitimises the use of spyware like Pegasus.

Go deeper

Goa may be the country's party capital, but this year, the confetti's dampened. 

Why?

Regulatory hurdles have put the brakes on tourist arrivals, leaving local businesses with jingle bells in their pockets and not enough jingle in their registers.

For months now, many restaurants have been awaiting permission to reopen their sealed properties due to licensing issues.

• Business has been slow this December, with lower footfalls as the nightlife of Goa has been affected by the shutdowns

• The number of music festivals and concerts has also dropped due to concerns about shutdowns

To make matters worse, there is a decline in international interest among travellers visiting Goa, with foreign tourist arrivals falling significantly short of pre-Covid levels. 

• The number of foreign tourists visiting Goa is 70% lower this year compared to the levels recorded in 2019

Competition is also intensifying as Vietnam and Bali are becoming preferred destinations for tourists from both India and abroad. 

• With new visa-free options in Thailand and Malaysia, Indian tourists are increasingly choosing those destinations over Goa

Dig deeper

• Apple's latest research on running large language models on smartphones suggests a push to catch up with rivals in generative AI.

• Law firm Allen & Overy, partnering with Microsoft and AI startup Harvey, launched a contract negotiation tool using AI to draft and amend agreements, aiming for faster deals and new business. 

Grab your cosiest blanket, brew a cup of hot cocoa, and get ready for a weekend filled with heartwarming tales and laughter.

Here is a binge-watching list to fill your Christmas weekend with heartwarming cheer and maybe even a tear or two (of joy, of course!):

• Home Alone
• Klaus
• Love Actually
• Elf Me
• Your Christmas or Mine?
• A Boy Called Christmas

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