The government on Tuesday assured domestic startups of full support in the aftermath of the collapse of Silicon Valley Bank (SVB). In a meeting with minister of state (MoS) for electronics and IT Rajeev Chandrasekhar, over 450 entrepreneurs and venture capitalists also urged the government to come out with deposit-backed credit lines and innovative credit products to support startups.
Startups like Zoth.Io and Hatica.Io, and VCs and financial service providers like Blume VC and Mirae Asset, were part of the meeting.Among other things, some of the concerns shared by the attendees included transfer of their dollar deposits to India and to US-based branches of Indian banks.
“The Indian banking system is most stable and robust and you (startups) must explore it as part of your organisational framework. While startups have a natural incentive to use banks like SVB, we must figure out a way to use the Indian banking system without changing your business model,” Chandrasekhar said.
“We will share a list of suggestions with finance minister and explore how best your concerns can be addressed,” he said, adding that the government will also explore how smoothly it can facilitate the transfer of dollar deposits of startups to Indian banks, IFSC-centred foreign banks or any other Indian bank
On March 10, the California Department of Financial Protection and Innovation had shut down Silicon Valley Bank after depositors started withdrawing their funds all at once. The bank had $209 billion in total assets and about $175.4 billion in total deposits.
For startups which do not have access to deposits, the government will also explore the option of whether any credit lines can be made available in dollar or rupee. “We will also try to see if more credit products like in the US can be made available to you and make it easier for them to move from SVB to any other Indian bank in the US,” Chandrasekhar said.
“It’s heartening to see the government’s attention to the concerns of the startup community. We need more such interactions between various stakeholders to enable a conducive environment for startups to thrive,” said Yashraj Akashi, founder of TedXGateway, in a tweet.
A poll 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 accounts in the US, including some who had upwards of $1 million.
In an announcement, the US Federal Reserve, along with Federal Deposit Insurance Corporation (FDIC), said it will protect all the clients of the bank and they will be able to access their money. Further, the Fed will also roll out an emergency lending programme to prevent a wave of such collapses and provide stability to the US banking system and the economy.
On Monday, FDIC said all deposits of SVB have been transferred to a new bridge bank.
“The SVB collapse in the US is in sharp contrast with India’s stable and strong financial sector,” Chandrasekhar said in a tweet.