The Silicon Valley Bank (SVB) crisis has rocked the global start-up world. While Indian start-ups’ exposure to SVB is limited, according to investors, the crisis does put a spotlight on challenges that beset the ecosystem at large.
Mohandas Pai, chairman of Aarin Capital and former Infosys executive, took to Twitter on Sunday to encourage more companies, especially Indian start-ups, to resist pressure from large investors to domicile outside. In a conversation with Business Today, Pai said that in the immediate future, the government should enable all major banks such as Kotak Mahindra Bank, State Bank of India, and HDFC Bank to open a facility where start-up entrepreneurs who had parked their money with SVB can transfer the cash “without a KYC”.
“The KYC can be fulfilled later. For now, money needs to be transferred freely and capable of being spent without approval.” He said that in the earlier days at Infosys, the Reserve Bank of India introduced the facility of Exchange Earners’ Foreign Currency Account (EEFC), which made overseas remittances a smooth process. A similar scenario needs to be chalked out Indian start-ups, he highlighted.
He also told BT that the government should focus on expanding the ease of doing business in India. “These are young entrepreneurs. If we make it hard for them to operate here, they will go outside.”
“The tax men come knocking on the doors of start-up entrepreneurs which makes operating in India a nightmare," he said.
Despite the chaotic events that have unravelled in the US in the past few days, regulators came forward on Sunday to help the depositors of SVB.
The move that will supposedly give start-ups a huge relief, the Treasury, the Federal Reserve, and Federal Deposit Insurance Corporation (FDIC) announced depositors of the troubled Silicon Valley Bank will have “access to all of their money” starting March 13. “No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer,” the US bodies said in a joint statement.
The statement also announced a similar systemic risk exception for New York-based Signature Bank, which was closed by the state chartering authority.