Banks look to cash in on start-up wave by carving a new segment

Lenders expect some of these start-ups to balloon into large companies in years to come

Many banks have established a separate internal segment to cater to the needs of start-up entities, as they see value in building a relationship with some of these expected to become large companies in years to come.

"For the first time in our country, entrepreneurship is being promoted in a structured manner. And, most of private equity and venture capital funds are foreign owned; investments will flow in. Clearly, they are here to stay and become bigger; we want to engage with them as they start up," said Smita Bhagat, co-head, e-commerce at HDFC Bank. It has launched services that offer banking transactions, advisory services, forex and payment solutions for start-ups.

Recently, State Bank of India opened a dedicated branch for start-ups in Bengaluru, to assist them in servicing needs such as employee account maintenance, arranging for funds, etc. RBL (formerly Ratnakar Bank) has also opened a specialised branch for this category.

"They have to get the business started and at this time, we come up with a value proposition offering specialised services, which also ends up being a differentiator for us, and so we are engaging with this highly charged-up eco-system from early on," said Rajeev Ahuja, strategy head at RBL.

The bankers also expect that as these companies keep engaging with them, it would be possible to cross-sell products.

Recently, even the Reserve Bank of India has expressed interest, saying it would take steps to contribute to an environment that is conducive for growth of start-ups.

Experts say segmentation helps in attracting a new customer base. "It is similar to what we have seen in other product offerings, such as for women, senior citizens, kids, etc. The products might be fairly similar but marketing and packaging it differently helps attracting potential clients," said another banker, requesting anonymity.