RBI Chief Cautions Banks As SVB Financial Files For Bankruptcy. How It Affects Indian Startups

SVB Financial sought bankruptcy protection after US authorities took over as it could not manage to stay afloat on its own.

SVB Financial Files For Bankruptcy: RBI Governor Shaktikanta Das on Friday cautioned Indian banks on asset-liability mismatch as SVB Financial, Silicon Valley Bank Parent company, filed for bankruptcy today. SVB Financial sought bankruptcy protection after US authorities took over as it could not manage to stay afloat on its own. SVB specialised in financing startups and had become the 16th largest US bank by assets: at the end of 2022, it had $209 billion in assets and approximately $175.4 billion in deposits. SVB Financial Group is no longer affiliated with Silicon Valley Bank after its seizure by the Federal Deposit Insurance Corp. The SVB crisis in many ways serves as a reminder of the financial crisis of 2008.

The RBI Chief, while commenting on the ongoing banking turmoil in the US said, the ongoing crisis drives home the importance of robust regulations that focus on sustainable growth and not excessive build-up either on the asset side or liability side. Das avoided taking any names but he did say that one of the banks had unmanageable deposits in excess of their assets side business. He was delivering the annual KP Hormis (Federal Bank founder) commemorative lecture in Kochi today.

How This Will Impact Indian Startups

Several Indian startups had more than a billion dollars of their funds in SVB, Union Minister Rajeev Chandrashekhar said. Chandrashekhar assured that he passed on the suggestions of the startups affected by SVB’s closing to Finance Minister Nirmala Sitharaman.

Citing the suggestions proposed to the Finance Minister, Chandrashekhar said, Indian banks could offer a deposit-backed credit line to startups that had funds in SVB, using those as collateral.