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New Delhi: Amid the growing concerns of Indian startups following the collapse of the Silicon Valley Bank (SVB), the Minister of State for IT & Electronics Rajeev Chandrasekhar on Tuesday has assured over 450 startups, venture capitalists (VCs) and other investors that he will take up their issues with the Ministry of Finance and the Reserve Bank of India (RBI), including demands of short-term liquidity needs.
An option for the startups to allow transfer of money from their SVB accounts to Indian banks without facing any taxation issues is also likely to be recommended by the Ministry of Electronics and Information Technology (MeitY). It is also expected to urge the Finance Ministry to allow overseas branches of Indian banks to accept deposits from these startups on priority.
Rajeev Chandrasekhar chaired a meeting attended by over 450 startups on Tuesday where these recommendations were made. It is also said that his ministry will set up an email hotline and a form for those who still face liquidity issues.
“By Tuesday evening or Wednesday morning, MeitY will send a representation to the Finance Ministry highlighting the inputs it received during the meeting. Among the recommendations would be: if Indian banks lend against the deposits that these businesses have in their SVB accounts to address their liquidity issues, and if people want to transfer money from their SVB account to an Indian bank, there should be no taxation or issues under the Foreign Exchange Management Act (FEMA),” a senior government official told the Indian Express.
Silicon Valley Bank is often touted to be the best bank for startups. As per the bank’s website the Silicon Valley Bank Startup Banking is “designed for founders and entrepreneurs to help support, build, and grow their startup.”
The collapse of Silicon Valley Bank has impacted thousands of startup across the world, including several in India from the SaaS (software as a service) sector. As per an Indian Express report, nearly 60 start-ups backed by the US-based technology accelerator YCombinator (YC) were among the worst hit.
It is said that even as the US Federal Reserve said that Silicon Valley Bank customers would have full access to their deposits on Monday, several startups have not been able to recover their entire money. Some of them have more than $3 million in their SVB accounts, but have only been able to get $250,000, the start-ups are learnt to have told Chandrasekhar, said the Indian Express report.
“In an age when prudence and low risk are becoming profound attributes for successful banking, rather than increased risk taking, the Indian banking system is ideal for that. Given prudence and a stable banking environment – maybe not as flashy as the SVB – if we really position our banking system as being able to serve a clientele of start-ups, it will be a win-win for both,” Rajeev Chandrasekhar told The Indian Express.
As per Karun Arya, chief growth manager at revenue-based financing GetVantage, who attended Monday’s meeting, MoS Rajeev Chandrashekhar proposed the concept of a deposit-backed credit line system as a probable interim solution to the problem, reported Times of India. In this model, credit can be offered as a percentage of deposits that business owners have with their banking partners.
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