SVB crisis: IBA panel meet next week may discuss strategy to back start-ups

Banks need a multi-pronged strategy to boost presence in start-up ecosystem following SVB's collapse, say experts

The top panel of the Indian Banks’ Association (IBA) next week may discuss a mechanism to support the start-up ecosystem in the country and cash in on the opportunity in disguise following the collapse of the California-based Silicon Valley Bank (SVB), people aware of the development said. 

Indian banks, especially public sector banks, have little penetration in the start-up ecosystem. They need to work on risk management, talent development, and funding pool to service start-up clients and increase their presence in this space for a meaningful business, according to bankers.

Discussions at the IBA are likely to focus on industry-level issues, such as regulatory norms and capacity building, bankers said.

“We do not see enormous opportunities for Indian banks in the near term due to the current crisis,” said a top private bank executive.

Private sector lender Axis Bank on Monday said in light of the developments unfolding with regards to SVB, it would take this window of opportunity to help start-ups that could have been impacted by the American bank’s collapse.

SVB was instrumental in financing start-ups and technology players. It faced stress after incurring huge losses on its holdings of US bonds, following the most-aggressive monetary tightening cycle by the Federal Reserve in around four decades.

Several Indian start-ups and SaaS companies are expected to have parked the money raised by them overseas and they bring funds to India as and when they need it. “We are actively engaging with these start-ups to help them park their funds in the GIFT City branch of Axis Bank. It also opens doors for further business engagements with these entities in the future,” said Ganesh Sankaran, group executive & head-wholesale banking coverage group, Axis Bank.

“A few companies in the B2B e-commerce marketplace, large online car marketplace, and agri/food tech space have evinced interest in moving their funds to our GIFT City branch. Many financial sponsors have also connected us with their portfolio companies and are keen to explore our GIFT City proposition,” he further added.

Public sector banks, too, have not been aggressive in funding start-ups because of the high risk. Venture capital players provide most of the funding.

A senior public sector banker said for banks to convert this opportunity (the opening provided by the collapse of SVB) into tangible business, they have to begin work now. Perhaps banks will have to internally create a separate unit or vertical. The focus has to be on building a talent pool – bankers with expertise for start-ups ecosystem -- risk management and allocation of funds may be at higher pricing reflecting risks.