In a discussion note on ``Promotion of venture capital funds'', Phdcci identified information technology, bio-technology, agri-business and automobile components for creation of such sector specific VCFs.

The large profit making banks in India should be encouraged to participate in such vcfs by the government by providing adequate tax regime, legal infrastructure and disinvestment option, the note suggested.

The legal framework for the success of these funds should include tax incentives, including tax breaks and exemptions on net income received from the investment in a venture capital institution or on net capital gains upon dissolution of the institution.

It should also allow use of capital losses to offset ordinary income of capital gains. This way governmentcan create the right macro economic environment for successful development of VCFs, the chamber said.