The IT ministry will take up woes of Indian startups impacted by the Silicon Valley Bank collapse with the finance ministry to help them navigate through the crisis and address the immediate liquidity crunch they are facing, Union Minister Rajeev Chandrasekhar said on Tuesday.
The Minister of State for Electronics and IT during interactions with startups asked them to engage with the Indian banking system, which has been very robust and assured them of resolving teething issues they may face. Though startups and venture capitalists said that the US government authorities have assured of returning full money to the depositors, there is no clarity on the timelines, which will lead to a liquidity crunch in the firms that have been impacted by the SVB collapse, according to the minister.
“I am going to put together a suggestion list and give it to the honourable finance minister on your behalf, and work closely with the government of India as a whole,” Chandrasekhar said. Most of the Indian software-as-a-services startups with a presence in the US and firms linked to incubator Y Combinator are among those entities who are feeling the heat of the SVB collapse. Some of the startups shared that they were able to move their funds to US-based banks, but are exploring ways to shift their account to safer destinations.
The minister asked startups to explore ways to use the Indian banking system and shared that the government will try to create a framework to help them continue to operate the way they do in the US without any hassle. “I would certainly think that we must figure out a way of getting you to use the Indian banking system without changing your business model, how you operate in the US or your payroll in the US or your expenses in the US. We will create a separate framework and create more awareness of this in the earliest possible time,” Chandrasekhar said.
A venture capitalist said that several startups have to make significant expenses in silicon valley, but the FEMA (The Foreign Exchange Management Act) rules are not friendly to fund their operations overseas, and if the money comes back, there are questions that if the Enforcement Directorate will allow easy flow of the overseas fund. A startup shared that American banks provide healthy credit lines, which makes it attractive for firms to bank in the US, and several venture capitalists ask the startups to have an account in the US for funding. The minister said that he will take up the issue of startups in helping them transfer their money to Indian banks, and facilitate them with credit lines to meet immediate liquidity crunch and other issues to navigate them easily through the storm while re-emphasising on use of Indian banks for the transactions.
“I would strongly suggest that you look at the Indian banking system, because certainly, without sounding like I’m pitching for the banking system, this is the most stable. This is the most robust and my suggestion strongly is that you explore this as part of your overall operational framework,” Chandrasekhar said.
