Saturday, July 20, 2024

Growing Startups Via Indian Banking

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The world watched as the Silicon Valley Bank (SVB) collapsed. Ironically, the Hindenburg report which analysed the Adani Group and Indian banking failed to look into their own backyard.

The Biden administration has issued that the investors will have access to their money this week. Back in India there is another issue at hand. SVB was a significant lender to companies in the US-India market. With its recent fall down, there is a possibility of cutting out their workforce as cost cutting measures.

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Silicon Valley Bank, India And Startups

With the SVB going bankrupt, the Indian market will be affected as well. The exporters from India will suffer losses since they depend upon investments from the SVB as well as the market for selling their goods.

This will drastically impact growth rate and the investments incoming to Indian subcontinent as well.

While the downsizing might start soon, the Biden government is vouching for the SVB. The money of the investors will be retrieved. However, majority of the SVB’s investors are the startups. This was also a major reason for its fall. Firstly, is the lack of diversity in its investors. Secondly, the startups are reliable till they are not hit by the funding winters.

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Safe Banking In India

The SVB failure as well as the 2008 financial failure did not affect the Indian Banking System. It is evident that Indian Banks are doing something right in this aspect. There are Domestic Systematic Important Banks, which protects it from financial crisis’s.

For selection of the banks, the RBI follows a two step process. A sample of the banks is assessed for systemic importance. Banks with the GDP greater than 2% are selected. They are further separated and segregated based upon their systemic importance.

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Indian Banking And Startups

A lot of the investors of the SVB were Indian startups and it begs the question as to why they seek foreign banks for their setup? What if there was an alternative in India for investing?

The banks in India will be a better alternative for the startups as well. India produces Startups at a fast rate. Many of the successful companies like Meesho, PayTm, Dunzo, Nykaa, CRED and so many more!

Clearly the Indian Banking System has been doing it right since it has held its ground in the US’s financial crisis. The Startups are looking to retrieve their money from the SVB and seeing the scenario today, Indian Banks are the safest and stable. In fact, the government is working out a way to ensure Indian Banking system is a part of startups without changing their business model.

Promoting Startups In India

The government is approaching to address and assist the members of Indian startups with holdings in the SVB. A meet was held with participants like Blume VC, Zoth.Io, Hatica.Io, Mirae Asset and VCs. Their major concerns included transferring their US dollar deposits to India as well as Indian Banks in foreign countries.

This comes as a good sign seeing that the Indian Banks have earned the trust of the startups to invest in them. There needs to be greater flexibility to make the Indian banks a more viable option for startups. It has been a general trend that startups go to foreign banks for their reasons. However, seeing the reliability and stability provided by the Indian banks, the financial turnings in favour of the Indian banks will rise. A number of changes will need to be affected to come to a mutual ground. Currently, the Finance government is working with startup partners to improve investment of startups in Indian Banks and promote startups in India.

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