“The government of India’s priority is to tide over this threat. We want that every startup is able to navigate this storm and will do whatever to make sure they navigate this period..,” Chandrasekhar told participants in a video-conference meeting.
Those who attended the meeting on Tuesday told ET, on the condition of anonymity, that the Ministry of Electronics and Information Technology (MeitY) pitched the resilience of Indian banks to startups, and urged them to bank locally.
During the meeting, several startups informed the minister about the reasons for banking abroad, which include having a large customer and vendor base in the US – a typical trait of companies in the software-as-a-service (SaaS) segment, and the need to have overseas entities to raise funds from foreign venture capitalists.
“There was also a concern raised by a VC firm executive on the awareness of Gift City banking,” one of the persons cited above said.
On Sunday, the minister had said on Twitter that he would be meeting startups this week to gauge the impact of the crisis. Later, following the US Federal Reserve’s announcement on all depositors of SVB being made whole, he said that looming risks to Indian startups had passed.
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“Learning for Indian startups from the crisis – trust Indian banking system more,” he had tweeted on Monday. ET reported on Tuesday that Indian startups with funds in SVB were finalising ways to transfer their money elsewhere. Several startup founders said that while the panic over their deposits getting stuck had been settled, they were working with Indian as well as international banks to move the funds out of SVB.
On Monday, some of them were already opening accounts at bank branches at the International Financial Services Centre in Gujarat’s Gift City. Banks in Gift City allow customers to open foreign currency accounts for international transactions.
RBL Bank, ICICI Bank, Kotak Mahindra Bank, Axis Bank and HSBC are working with them to open accounts in Gift City, startup founders and investors said. These companies are also exploring transferring their deposits to neobanks like Brex in the US as well as traditional institutions such as JPMorganChase, HSBC and CitiGroup.
In the meeting with Chandrasekhar on Tuesday, startup founders also flagged compliance burdens in moving funds from the US to India. “There are various regulatory compliances to be done when bringing in money from overseas into India with several provisions pertaining to Foreign Exchange Management Act (FEMA) to be fulfilled. This was flagged to the minister, and we are hoping the government can intervene in some way,” another founder of a startup who attended the meeting told ET.