Will help founders access loans, prevent equity dilution: SBI chairman

“There is no source of funds like debt for startups,” Khara, who opened SBI’s first startup branch at Koramangala in Bengaluru, told the media. He suggested that founders often sell their stake cheaply to investors after they fail to access bank loans.

The bank would set up such dedicated branches for startups in Gurugram and Hyderabad in six months.

“We are evaluating opportunities in other cities,” Khara said. The initiative followed elaborate interaction with startup entrepreneurs to understand their specific needs, he added.

He said SBI could lend up to Rs 2 crore to a startup with a background of proven technology, backed by a CGTMSE guarantee. “We are confident there are ample opportunities for us to create value for startups,” Khara said.

Currently, about half of Indian startups have been funded by equity, the SBI chairman said. Over the past 18 months, the SBI has disbursed about Rs 250 crore to more than 100 startups across the country.

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Supporting startups was also the need of the economy the SBI was trying to address, Khara said.

The branch in Koramangala would provide investment banking, treasury operations, advisory other ancillary financial services through its subsidiaries as well as managing the liabilities of startups.

However, there is a catch: Startups should have registered themselves with the Department of Promotion of Industry & Internal Trade (DPIIT) for them to reach out for credit.

Earlier, problem-solving, or productivity enhancement tools were at the core of startup activities, but now they are addressing specific needs of the economy. They now need a patient capital that can now come from within the country, the SBI chairman said, and added his bank will curate solutions for specific problems faced by startups.

The branch in Bengaluru was started under a pact between the state government and SBI to further boost the startup ecosystem, IT/BT Minister CN Ashwath Narayan said after the launch.

“The needs of startups are unique, and customised financial offerings and services would make them more accessible. Beyond VC funding, credit facilities from banks play a significant complementary role in ensuring capital adequacy for startups. It opens up new vistas for startups in the state,” Karnataka Startup Vision Group chairman Prashanth Prakash said.