Union minister Rajeev Chandrasekhar will meet Indian startups this week to understand the impact of the Silicon Valley Bank (SVB) collapse. The meeting is scheduled to guage if there's a need and demand for intervention by the Centre. The Minister of State for Skill Development and Entrepreneurship "acknowledged that SVB closure is affecting start-ups around the world". He assured that Start-Ups are a part of the new-economy.
The Silicon Valley Bank has been shut down by regulators, the Federal Deposit Insurance Corporation (FDIC) said on March 10. The California Department of Financial Protection and Innovation had then issued the closure order and named the Federal Deposit Insurance Corporation (FDIC) as the receiver, with the responsibility of safeguarding insured deposits.
Industry experts believe that the collapse of Silicon Valley Bank, the largest vendor in the startup ecosystem, is likely to adversely impact the Indian startup scenario as well as it has injected a lot of uncertainty in the sector overnight.
"The reality is that the Silicon Valley Bank has been a real supporter of the Indian startup scene and has provided banking services. Most Indian startups that do business in the US use this bank because it is one of the few institutes willing to work with the Indian banks. A lot of the banking institutes do not want to work with overseas customers,” Garg, an alumnus of IIT Delhi, was quoted by PTI as saying.
Given that every third startup in the Silicon Valley is founded by Indian-Americans, experts feel a significantly large number of these founders would be impacted as early as next week in terms of even making basic payments and giving paychecks to their employees.
Similarly, a large number of Indian startups which do not have even an employee or an office in the US had opened up their accounts in the Silicon Valley Bank as it let them do so without much regulatory questions and with a customer-friendly approach. "The implications of the collapse of SVB on Indian-Americans and their companies are very serious," Garg said.
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However, experts, while speaking with Business Today, said "startups need not panic" in the backdrop of latest development. Vivek Khandelwal, Founder of iZooto, was quoted as saying: "Most companies in the B2B SaaS space have SVB accounts. Lot of us could move a chunk of our funds after Thursday night’s tanking of the stock had triggered enough panic."
Before its closure, SVB was the 16th largest bank in the United States, operating 17 branches across California and Massachusetts. The bank held assets worth $209 billion and deposits of $175.4 billion.
The US Federal Reserve will also hold a closed-door emergency meeting of the Board of Governors on Monday, the Mint reported. The meeting will be held under expedited procedures, as set forth in section 261b.7 of the Board's Rules Regarding Public Observation of Meetings, at the Board’s offices at 20th and C Streets, N.W., Washington, DC and by audio/video conference call.
(With inputs from PTI)
First Published: Mar 12, 2023 10:42 AM IST
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