RBI says SVB collapse may impact global funds for Indian startups
- ByStartupStory | April 4, 2023
The Reserve Bank of India (RBI) has informed a parliamentary panel that the collapse of Silicon Valley Bank (SVB) may temporarily affect the availability of global funds for Indian startups. However, the RBI has assured the parliamentary standing committee on finance that the impact of SVB’s collapse on the Indian startup ecosystem appears to be limited, as reported by the media.
On Monday, top officials including Department of Financial Services Secretary Vivek Joshi, RBI Executive Director Ajay Kumar Choudhary, and SBI MD Alok Kumar Choudhary, deposed before a parliamentary panel headed by BJP MP Jayant Sinha. Officials from the Department for Promotion of Industry & Internal Trade (DPIIT) and Indian Venture & Alternate Capital Association (IVAC) were also present.
According to a presentation made by the Reserve Bank of India to a parliamentary panel, the global venture capital industry is reducing or revaluating investments due to rate hikes and tightening liquidity conditions. The RBI added that fundraising activity in India has declined by 35% from $37.20 billion in 2021 to $24.70 billion in 2022. The collapse of Silicon Valley Bank may contribute to this trend, and the availability of global funds for Indian startups may experience a short-term pause. The RBI also stated that Silicon Valley Bank has two non-financial subsidiaries in India, including SVB India Advisors Pvt Ltd, which is involved in legal, loan operations, accounting, bookkeeping, auditing, and other activities.
Jayant Sinha, the chair of the parliamentary panel, described the meeting with representatives from the RBI, SBI, DPIIT, and IVAC as “satisfactory.” The RBI presented to the committee, stating that global liquidity and rate hikes were causing a reduction in investments in the venture capital industry, which had already declined by 35% in India. The central bank also confirmed that Indian startups have access to their deposits with SVB. Additionally, the RBI reported that SVB has two non-financial subsidiaries in India, including SVB India Advisors Pvt Ltd (SIA) and SVB Global Services India LLP (SGSI).
According to Sinha, Indian startups are seeking to broaden their dollar deposits to financial institutions located in Gujarat’s GIFT City. The committee has acknowledged the necessity for tailored financial services for Indian startups and a number of financial institutions in India are establishing specialized branches and products for this purpose. Furthermore, Sinha stated that Indian banks are highly secure and sufficiently capitalized.
SVB Financial Group, a lender catering to startups, became the largest bank to fail since the 2008 financial crisis on March 10. First Citizens Bank has acquired its business in the US, while HSBC has taken over its operations in the UK after the collapse. According to MoS IT Rajeev Chandrasekhar, Indian startups had deposited approximately $1 billion with SVB.
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