SBI working towards Deft Financing Startups


SBI working towards Deft Financing Startups

The State Bank of India stated that it is working on a means to debt finance start-ups because present regulations only allow banks to invest profitable businesses.

Startups raise equity financing to run their businesses, forcing promoters to dilute their stakes because loan finance is not accessible for the industry because it is loss-making in the early years, according to a senior bank official.

“We are struggling to debt fund startups. Bank norms and rules allow debt funding to profitable ones. As initially startups are loss making, they are to be funded based on the viability of the idea only. We are trying a way out,” SBI Managing Director, International Banking, Technology & Subsidiaries, Ashwini Kumar Tewari said at the annual general meeting of The Bengal Chamber.

He stated that SBI Ventures, a division of the bank, was conducting equity financing and that the government needed to promote the start-up culture.

Under Prime Minister Narendra Modi's "Startup India" initiative, the number of government-recognized startups has increased by approximately 85 times. According to data from the trade ministry, the number of startups has climbed from 504 in 2016 to 42,733 in 2020.

In terms of the economy, Tewari stated that, despite a solid recovery, the country's growth will be weaker in 2020 than it was in 2019. This is owing to the pandemic.

“Large businesses are doing well. The problem is in the SMEs and the small sector. Large corporations are repaying more. Credit growth is driven by retail,” he said.

He noted that while gold loans are not popular in India, there are many of them, indicating the anguish that ordinary people have through. "If gold loan is increasing, it is good for business but it is also a sign of the helplessness of normal people,” Tewari said.

During the day, the Bengal Chamber introduced its Ease of Doing Business app for industry stakeholders. Non-members and subscriber members alike can now submit questions to the Chamber's specialists in a variety of fields.