Banks, fintechs come to aid of domestic startups

Several industry players FE spoke with, however, said the impact of SVB on Indian startups is likely to be minimal.

Banks, banking news, razorpay, SVB, Silicon Valley Bank, Fintech, startups, funding
The movement of funds from SVB will take time.

With the abrupt demise of Silicon Valley Bank (SVB), the biggest in more than a decade, Indian banks as well as fintechs like Razorpay have reached out to domestic startups to set up Nostro accounts overnight to remove funds from SVB and other banks in the US. A Nostro account refers to an account that a bank holds in a foreign currency in another bank.

However, the movement of funds from SVB will take time. As reported earlier, US banking regulators on Friday took over SVB to protect depositors. The Federal Deposit Insurance Corporation (FDIC) only insures bank deposits up to $250,000. Clients having deposits higher than this figure may have to wait for an insolvency process, analysts said.

“Given the recent news, we at Razorpay have created a dedicated desk to help fellow startups in urgently moving funds from their US bank (accounts) to India. Existing RazorpayX users can move their money into their Indian current account as FDI or regular forex against invoice. Others can move their money into a Nostro account and then move it into an Indian account within 48 hours,” said Shashank Kumar, co-founder and managing director, Razorpay, in a WhatsApp message to an internal group. FE has reviewed the message.

“Razorpay, with the pitch, is trying to offer flexibility like a foreign bank would to Indian startups,” one of the persons aware of developments said. “For anyone wanting to bring money to India over the long-term, and not immediately, ICICI is providing an option to open an account in GIFT City and move money there… they are helping fast-track this. We are also exploring this option for a few customers,” another message on the group read.

Confirming the development, a Razorpay spokesperson, in response to FE’s queries, said, “The ongoing SVB collapse has, unfortunately, landed several Indian tech startups in a soup, keeping them on tenterhooks over the past 24 hours. We also understand that this event may cause a few companies to be unable to make payroll in the next 30 days.”

Several industry players FE spoke with, however, said the impact of SVB on Indian startups is likely to be minimal. This is because of the timely communication of many major venture capital (VC) firms that wrote to their portfolio companies over the past week, asking them to move funds from SVB at the earliest, sources said.

“There was something brewing over the past week about SVB and it would have reflected badly on us investors if we did not ask portfolio companies to start pulling out deposits. Most of them have done it already, but 10-15 from the Indian startup ecosystem are yet to pull out their deposits from SVB,” a senior executive at a large VC firm said.

As of Friday evening, startups like Scaler, an edtech company, was still in the process of withdrawing its deposits, estimated to be north of $10 million, the person added. Scaler did not respond to FE’s queries till the time of going to the press.

Firms like Verak, an insurance provider that is backed by Lightspeed and Y Combinator, are not too worried about their deposits in SVB yet. “We don’t have any cashflow problems. We have about $188,000 in the SVB bank account in the US, but the good thing is that up to $250,000 is covered by the Federal Deposit Insurance Corporation insurance, so we should be fine. Net-net, we are not exposed but yes, if we had some immediate financial obligations, we would perhaps not be able to access funds from the US bank account,” Rahul Mathur, founder and CEO, Verak, told FE. However, a poll run on the WhatsApp group of all Y Combinator founders in India showed that over 50% of over 100 participants had more than $250,000 in their SVB bank accounts in the US, including some who had upwards of $1 million. YC backs about 300 startups in India. FE has reviewed a screenshot of the poll.

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First published on: 12-03-2023 at 04:30 IST
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