The fund will be the largest one (Rs 500 crore) from the bank, which floated a venture capital subsidiary way back in 1989. The VC arm has so far floated four funds, the total corpus of which is Rs 112 crore (Rs 1.12 billion) and has invested in around 80 companies.

Senior officials of the bank confirmed that they have sought approvals from the regulatory body, after which they will be hard-selling this product to other government-owned institutions for participation.

Allahabad Bank [Get Quote], Corporation Bank [Get Quote], Indian Overseas Bank [Get Quote], Oriental Bank of Commerce [Get Quote], Vijaya Bank [Get Quote], Andhra Bank [Get Quote] and Small Industries Development Bank [Get Quote] of India have earlier participated as investors in its earlier fund, the corpus of which was around Rs 60 crore (Rs 600 million).

This new initiative from Canara Bank follows a series of measures initiated in the last six months. This financial institution first divested 49 per cent in its asset management business to Rebecco, and then went in for a massive rebranding exercise in an effort to connect to young investors.

The bank during the past three quarters has also been aggressive in lending to the GMR Group. According to Venture Intelligence, a venture and private equity research firm, India-focused PE /VC funds have raised $4 billion during the first half of 2008 and this number is expected to cross the $10 billion-mark.