3 Indian Banks Assemble To Support SVB-Hit Startups

Axis, ICICI & Kotak Mahindra Bank are assembled to assist the startups which have been affected by the collapse of Silicon Valley Bank (SVB) in the US.

In order to help businesses affected by the failure of Silicon Valley Bank create fresh dollar accounts in Gujarat’s Gift City, which serves non-residents and offshore entities, at least three Indian banks—Axis Bank, Kotak Mahindra Bank, and ICICI Bank—as well as the Indian unit of HSBC—assembled strong teams and worked through the weekend.

When a transaction freeze for Silicon Valley Bank is lifted, the banks set up dedicated teams to help startups move money to their locations in Gift City.

The Federal Deposit Insurance Corp. (FDIC) was named as receiver after SVB experienced a run on the bank on Thursday and Friday. US regulatory authorities were headed by the California Department of Financial Protection and Innovation.

The majority of US startups and many Indian businesses with US subsidiaries did all of their banking with SVB because of the bank’s pro-startup policy. Deposits of sizable funds from fundraising efforts also frequently ended up being detained with the bank.

While the bank was closed on Friday night, they momentarily lost access to their accounts and those deposits. A few businesses transferred money with the help of Indian banks hours before American authorities took action. Not everybody had success.

The FDIC insures each bank deposit up to $250,000, but according to SVB records, 97% of its accounts contained capital worth more.

On Monday morning, the regulator said, access to the insured deposits would be available. To diversify their funding, many businesses sought to open a second bank account.

According to a person with knowledge of the situation, HSBC put together a group of twenty executives from several markets to work on document processing.

The team includes professionals who are knowledgeable about Gift City regulations, KYC standards, and the minimal criteria for opening an account. Accounts can be opened by banks within 24 to 48 hours if all the necessary paperwork is in order.

Three startup investors verified that some other Indian institutions, including Kotak Mahindra Bank and ICICI Bank, were also assisting Gift City residents in opening alternative bank accounts.

A second investor claimed that obtaining a Permanent Account Number (PAN) is the largest obstacle to creating a bank account in Gift City.

Opening new bank accounts typically requires a physical presence and takes close to a week at the majority of major American banks.

The International Financial Services Centre Authority oversees Gift City, which permits businesses to transfer cash in international currencies, including the US dollar.

The majority of the affected firms offer software-as-a-service (SaaS) to US-based customers or work with international vendors who need US bank accounts. In order to access investor funds, startups supported by Y-Combinator must also operate in the US and open a US bank account, generally in SVB.