US-based founder criticises Indian bank for being overly cautious about loans, says the country is ‘credit-starved’

A US-based entrepreneur has sparked discussion on India's banking and credit ecosystem after describing it as a “credit-starved country” in a social media post that has gained significant traction online.

He compared the banking systems of India and the United States, saying that American banks are more willing to take calculated risks.

In an X (formerly Twitter) post, Shreyans Jain, co-founder of Y Combinator-backed Manicule, claimed that it's easier for lenders to receive a large loan through a US bank or credit union as they only require you to furnish a decent credit score and a short credit history. However, the situation in India is different, he said.

“If you walk into a US bank or credit union, all you need is a decent credit score and a short credit history to get a loan worth many times your annual income,” he wrote on the social media platform on Tuesday.

‘The list is possibly infinite’

In contrast, Indian banks, according to Jain, ask for a huge checklist, which includes a great credit score, long credit history, income tax return, income tax computation, and bank statements, among other documents.

“In India, you need great credit score, long credit history, ITR, income tax computation, bank statements, CA approved net worth statement, business balance sheets, business tax return and the list is possibly infinite,” he said.

Despite providing all these documents, he claimed that borrowers can still be rejected for loans that are barely three times their annual income and a small fraction of their net worth within a seven-year term, making the process cumbersome for many seeking credit.

US founder takes a dig at India's risk tolerance

Jain argued that India's cautious approach to lending may be limiting the emergence of more globally successful companies. He said that banks in India need to be more comfortable with taking measured and calculated risks.

“A credit starved country with zero banking risk tolerance isn’t going anywhere on the world stage. The next Anthropic or Foxconn isn’t gonna come out of India and change the world with chump change,” he wrote in the post.

Users share conflicting opinions and experiences

Responding to Jain's post, one X user claimed that he received his first $2 million credit line in the United States in 2011, even though he did not have a social security number (SSN). “I received my first $2 million credit line in the US in 2011, even without an SSN. The US helped me professionally in ways India never did — and likely never would,” the user said.

Another user disagreed to his viewpoint, saying that despite having a conservative lending structure, there are so many instances of loan defaults. “Imagine if loan were to be granted like the US, what would be the NPA level in banks today. Indian Banking is very strong. We are a conservative society, no need to emulate the west at every juncture (sic),” they added.

A third person argued that bank loans don't build tech giants, saying that major technology companies such as Google, Amazon and Anthropic were not built using traditional bank loans. Instead, they raised funds through venture capital (VC) and corporate equity investments.

Jain responded to the third person's comment, claiming that VC and credit are interlinked, as Google, Amazon, and other such big companies still borrow large amounts of money even with VC support and revenue.