Step 1: Understand the question.
We need the state that launched a Rs 12.66 crore Challenge Fund for rural entrepreneurship in March 2026.
Step 2: Identify it.
The Government of Sikkim launched this Challenge Fund.
Step 3: Its purpose.
The fund supports women and youth in rural areas in ecotourism, organic farming, handicrafts and small manufacturing, giving capital where collateral is lacking.
Step 4: Rule out others.
Telangana and Kerala have big startup systems like T-Hub and KSUM, but this specific fund was from Sikkim.
Step 5: Conclude.
The state is Sikkim.
Answer: Sikkim