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Rakesh Tulsiani

Rakesh Tulsiani is the COO at Digitalabs. He has worked across industries, including Banking, Automobile, E-commerce, Government, Hospitality, Retail, Telecommunication, Health Care, Electronics, Insurance, Media, FMCG, and Education.

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Startup India Scheme: Indian Banks Support System For Startups

They will need some more time to engage efficiently with startups, but in the time being all these initiatives from private lenders reflect that the banks have warmed up to the idea of startups and are encouraging more entrepreneurs not to give up their zeal of innovation.

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From the beginning of January 2016, the startup culture has amassed a substantial amount of attention in the country after the government of India launched the ‘Startup India’ initiative. The startups today are getting preferential treatment by the Indian banking sector after recognition of the immense potential in business expansion through investment. Previously the same fund granting giants were reluctant in financing the budding startups because of their conservative policy outlook. But the scenario now is dramatically different and the banking sector is more welcoming of the FinTech culture by readily providing credit lifeline to the rapidly advancing startup ecosystem in India.   

What is Startup India Program?

This flagship program initiated by the Government of India was a catalyst to boost up the startup economy of our country. The motive is to encourage entrepreneurs throughout the country by supporting their innovative ideas and bring about a paradigm shift where people create jobs rather than seeking employment. The goal of this program is to introduce more employment opportunities and ascertain sustainable economic growth of the country.  

Amongst the first five startup communities in the world, one is India. Based on the number of startups in the world, India proudly occupies the third place falling behind just the U.S and Britain and the number is only going to rise. Over 1300 startups joined the race in the year 2019, and by 2020, there are expected to be about 12,000 startups which will also need the requisite working capital to be a grand success, and some of them will even have a fair chance of joining the Unicorn club. 

According to a report by Nasscom, the startups have benefited the nation by scaling up employment opportunities. Over 60,000 direct jobs and 1.3-1.8 lakh indirect jobs have been created till date. 

Indian Banking System Ditching the Hesitancy

To reach the present position, the Indian startup ecosystem has gone through entrepreneurial evolution. Various public and private sector banks have introduced specific initiatives to take care of the funding as well as non-funding based banking needs of the blooming entrepreneurs. They have moulded themselves as great advisory platforms ensuring the entrepreneurs have quick and easy access to smart tools and adequate digital and cash management facilities.

Today, the banking sector plays a pivotal role in the journey of Indian startups. They aim to make banking easy and efficient at the early stage for smoother management of working capital. They are offering end-to-end Unicorn grade advisory services sincerely mentoring the startups over regulatory requirements while assisting with their financial discipline. When the companies make it to the global platform, the banks are backing them up as keen supporters managing their global liquidity, control and visibility of funds.

To promote the flow of investment Angel tax has been removed and banks like Axis, HDFC, ICICI, Kotak Mahindra have come up with many thoughtful initiatives to serve the banking needs of new-age companies. Such initiatives like ‘Thought Factory’ by Axis, ‘SmartUp’ by HDFC, or the ‘iStartup Garage’ by ICICI benefit the end receivers through legal and regulatory consulting, help with payment and FOREX solutions, assist the entrepreneurs through mentorship programmes and offer more customized and secure solutions apart from just funding. Through these initiatives, the startups stand a great likelihood of meeting the prominent VCs and Private Equity Players at events and summits organized by the banks.

The Leader’s Opinion

Banks are now engaging more and more with startups through exclusive programmes and funding. While sharing the reason for this exclusive treatment SBI Chairman Arundhati Bhattacharya says the banking sector wants to be a part of the startup’s growth and that of the country while supporting the entrepreneurs in their ventures and empower them to think in the direction of innovation. 

Sidharth Rath, Group Executive, Corporate Banking, Axis Bank, says that banks can leverage many business opportunities by funding startups and new-generation companies. He adds that Axis gives preference to companies with adequate equity funding that helps them to have enough liquidity and assist in debt servicing. 

Banks stand a good chance at raising their share of business by identifying startups that have a great potential of entering the Unicorn club at the early stage.

Takeaway:

The trend of a startup is only going to catch fire in the coming years, and the need for credit and working capital support is only going to rise. To make the most of the evolving FinTech playground, the Indian banks will have to keep on transforming to adapt. For mutual win-win, they will have to extend their partnership to the startups right from the beginning of their entrepreneurial journey and stick through their growth. The banks are already overcoming their conservative credit mindset and transiting more towards an entrepreneurial mindset coming to terms with the fact that out of hundreds of investments, only a few will fulfil the dream. They will need some more time to engage efficiently with startups, but in the time being all these initiatives from private lenders reflect that the banks have warmed up to the idea of startups and are encouraging more entrepreneurs not to give up their zeal of innovation.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house


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