The government assured the start-up community on Tuesday that it would enable start-ups and venture capitalists (VCs) about a smooth and non-disruptive transfer of funds from the US to Indian banks. Indian start-ups have been badly hit by the Silicon Valley Bank (SVB) collapse.
In a meeting chaired by Rajeev Chandrasekhar, Union Minister of State for Electronics and Information Technology, the start-ups were assured of government support in the crisis. The possibility of providing “deposit-backed credit lines” was discussed in the meeting.
Sources said that more than 450 entrepreneurs, VCs, and stakeholders participated in the meeting to discuss the fallout of the SVB collapse and how the government can help the start-ups overcome the crisis.
“The government’s priority is to tide over this crisis. We are laser-focused on making sure that every start-up is able to navigate this storm,” Chandrasekhar said.
He said the government will also work with banks and stakeholders to encourage the development of innovative credit products, adding that the Indian banks in the US need to engage and support start-ups proactively through new product offerings.
“I would strongly suggest that you look at the Indian banking system, because certainly, without sounding like I am pitching for the banking system, this is the most stable...this is the most robust system, and my suggestion is that you explore this as part of your overall operational framework,” Chandrasekhar urges the companies.
Chandrasekhar also said that he is going to put together ‘a suggestion list’ and give it to the Finance Minister on behalf of the start-ups and work closely with the government of India as a whole.
The start-up community welcomed this gesture and said the government is taking proactive measures to address their concerns.
However, a VC also said that several start-ups have to make significant expenses in Silicon Valley, but the Foreign Exchange Management Act (FEMA) rules make it difficult to fund their operations overseas, and if the money comes back, there are questions about whether the Enforcement Directorate (ED) will allow an easy flow of the overseas funds.
Another start-up said that American banks provide healthy credit lines, which makes it attractive for firms to bank in the US, and several VCs ask the start-ups to have an account in the US for funding.
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