Indian Startups Can Rely On Banking System In India: Rajeev Chandrasekhar After The SVB Collapse

Union Minister of State for Electronics and Information Technology, Rajeev Chandrasekhar, has conducted a meeting with the Indian startups recently for the collapse of Silicon Valley Bank. He met with 400 Indian startups and assured them that the Indian government is finding ways to protect them from economic vulnerability.

He has even reassured the startups that they will help them to navigate through the challenges that may occur through the events that took place recently. The Minister has ensured that he held discussions with different stakeholders of the startup ecosystem and shared how the government is aiming to ensure that every startup overcomes the difficulty.

He has stated that the Indian banking system is robust and trustworthy and that startups should start using them.
According to the co-chairman at PHDCCI for startups, Ashraj Akashi, Chandrasekhar has proposed a series of measures to build the startups during the meeting. It includes US funds to be transferred to Indian banks. The decision will result in a smoother transfer of money by startups and VCs.

Chandrasekhar provided another solution, i.e., deposit-backed lines of credit. The government will collaborate with stakeholders and banks to encourage the development of innovative credit products.

Akashi has stated that the Indian government is looking for different measures to support startups.

Chandrasekhar has even discussed with entrepreneurs and others the need for Indian banks to encourage and engage the expansion of startups proactively with the help of new product offerings.

The SVB crisis has not been over. The US regulators, including the Treasury Department, the Federal Reserve, and Federal Deposit Insurance Corporation, brought back some confidence to the startups after they announced that the depositors of the SVB will gain access to their funds starting March 13.

The Federal Reserve has even mentioned that it will provide funds to institutions if they assist them in meeting the needs of the depositors.

According to reports, more than 1000 Indian startups may have exposure to the SVB. According to the data collected b the software service provider company named Tracxn, Silicon Valley Bank had exposure to at least 21 startups in India although the data has not shown the size.

Top Venture capitalists firm have responded to the collapse of SVB, one of the largest banks in the US serving the global startup industry calling it a cause of concern and deeply disappointing.

Biden has taken the matter into their hands by calming the alarming investors over the SVB collapse, promising to protect the depositor’s money and fire the management of the bank.

He stated in an interview that the deposits of the investors will be with them. Small businesses across the country that have deposits in SVB can breathe easy knowing that they can afford to pay their workers and bills.

SVB collapse has caused Indian startups to look for alternatives:

Currently, Indian startups are looking for ways to reduce their exposure to US banks because they are concerned about a broader impact on the US financial sector following the collapse of the SVB. As 100 startups have been exposed to SVB, there has been a constant fear of the same trend occurring in Indian institutions.
Fintech companies have told media outlets that they received requests from Indian startups to transfer funds to local banks.

Karun Arya, Chief Growth Officer at GetVantage, spoke to media outlets about the situation, stating that they are working closely with Indian banking to allow businesses impacted by SVB’s collapse to quickly open an account to redirect their future revenues.

According to Razorpay’s executive, which has assisted Indian startups in urgently transferring funds to Indian banks, multiple startups have approached the help desk to take advantage of the services.

The failure of SVB has a direct impact on an Indian startup’s ability to access capital deposited with the bank.

Several fintech businesses have established a line of credit or funds that Indian startups can use to employ workers.

According to data sources, approximately 22 Indian startups have 1 billion USD in SVB exposure. 40 startups have funds ranging from $250,000 to $1 million USD, while 33 startups have deposits of less than $250,000 USD.

Soon after the SVB Financial Group was inspected by US regulatory bodies, financial stocks, and global stocks plummeted. It was quickly followed by a drop in its stock price, resulting in a USD 80 billion market loss.

Edited by Prakriti Arora