The State Bank of India said on Wednesday it was trying to find a way to debt finance start-ups because current rules allow banks to finance only profitable businesses.
Start-ups raise funds to run their businesses and promoters are forced to dilute their stake because debt financing is not available to the sector because they are in deficit in the early years, a senior bank official said.
We find it difficult to get into debt to finance start-ups. Banking standards and rules allow debt financing to the most profitable. As at the beginning, the startups are loss making, they must be financed according to the viability of the idea only. We are trying a way out, said Ashwini Kumar Tewari, Managing Director of SBI – International Banks, Technology and Subsidiaries, at the Chamber of Bengal annual general meeting.
He said the bank was doing equity financing through a subsidiary SBI Ventures and acknowledged that the country needs to support the start-up culture.
The number of start-ups recognized by the government as part of the “Startup India” initiative launched by Prime Minister Narendra Modi in January 2016, has increased by nearly 85. Their number has increased from 504 in 2016 to 42 733 startups in total in 2020, according to data from the Ministry of Commerce. 9231695003
Speaking on the economy, Tewari said despite a healthy recovery, the country’s growth will be lower than 2019 due to the pandemic.
Big companies are doing well. The problem lies with SMEs and the small sector. Large companies reimburse more. Credit growth is driven by retail, he said.
Referring to gold loans, he said that they are not popular in India but there are many that indicate the pain that normal people have suffered. “If the gold lending goes up, it’s good for business, but it’s also a sign of the helplessness of normal people,” Tewari said.
The Bengal Chamber has launched its Daytime Ease of Doing Business app for industry stakeholders. Subscribers and non-members alike can now learn about and benefit from the Chamber’s experts in various fields.
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