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CAN BANKS GIVE A LEG-UP FOR START-UPS?

It’s a sign of the times we live in. In his `Mann Ki Baat’ address to the nation over All India Radio last Sunday, Prime Minister Narendra Modi told us about the `Start-up India, Stand-up’ project his government plans to roll-out on January 16. It’s very well for some to dismiss this as another “slogan”, but in its scale of ambition, the project is unlike any other seen so far. The key building blocks that incubate new ideas are to be linked up – the Indian Institutes of Management, Indian Institutes of Technology, National Institutes of Technology and central universities.

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It’s a sign of the times we live in. In his `Mann Ki Baat’ address to the nation over All India Radio last Sunday, Prime Minister Narendra Modi told us about the `Start-up India, Stand-up’ project his government plans to roll-out on January 16. It’s very well for some to dismiss this as another “slogan”, but in its scale of ambition, the project is unlike any other seen so far. The key building blocks that incubate new ideas are to be linked up – the Indian Institutes of Management, Indian Institutes of Technology, National Institutes of Technology and central universities.

Now for a good part of post-Independence India, business — forget entrepreneurship – have got a step-motherly treatment. That we are talking about start-ups as we step foot into the 25th year of our reform journey tells us that we have not travelled all that very different a path during these years. In the sense, the “big boys” did make sure that their turfs were protected. What’s changed in recent times is that capital and technology now chase ideas – and ideas are nobody’s captive.

It’s also time we ask: have banks done enough (or are they doing enough?) to catalyse the start-up culture in a big way?

If you were to look out for overt outreach efforts by the traditional finance vendors towards start-ups, there are not every many you can write home about. We saw one last week by Mint Road – its set up a dedicated “helpline” to enable start-ups to seek advice on cross-border remittances under the foreign exchange management Act. What’s so great about it, you may well ask? After all, the “helpline” is nothing but an email – helpstartup@rbi.org.in – which helps start-ups query Reserve Bank of India (RBI). We are missing a larger point here.

The truth is start-ups may have lots by way of fire-in-the-belly and cheerleaders, but have to live with a finite amount of capital and patience – even if you may entertain an entirely different notion of this world. Now when even the best in the high world of finance at times get tied up in knots as they traverse central bank regulations (in any country), it’s a bit rich to expect start-ups and the restless behind them to figure it out or pay hefty fees to law firms and consultancies as they go about it. The RBI “helpline”, however, small a step it may be, will go a big way to help start-ups.

That it’s the RBI that’s taken this step tells you how the “Kremlin” — and we mean this in a good-natured way (you can always contend it can’t be that way at all!) – has also opened up. In October this year, RBI governor Raghuram Rajan made a trip to Bengaluru to meet brain-storm start-up concerns. It ranged from tax concerns (that’s not with his remit) to easier avenues for finance.

Open any Annual Report (of a bank) and you can read reams on how they have lent to small and medium-sized enterprises. But that’s not the same as hand-holding a start-up – you don’t get to bankroll it based on a track-record, and that means traditional models of credit evaluation have to be junked. Then several of these start-ups have “disruptive” potential and the ideas may tend to appear “outlandish” to the traditional banker. In any case, it’s not her remit nor is the “bank” the platform to “finance” such ventures. A bank steps in only when a venture becomes “bankable” in the way we now know it. But then “banking” is not just about giving out “loans” – they can act as knowledge partners to start-ups and help them “source finance”.

There’s good reason to believe that the `good governor’ took his cue from Modi’s dream for start-ups that he first articulated in his Independence Day Speech this year. It’s time banks took their cue from both Modi and Rajan and threw a helpline to start-ups.


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bank entrepreneurship rbi startups

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