Banks offer lifeline to SVB-hit startups
Lenders have set up teams to assist startups in moving funds

At least three Indian banks—Axis Bank, Kotak Mahindra Bank, and ICICI Bank—along with the Indian unit of HSBC, assembled crack teams to work through the weekend to assist startups affected by the collapse of Silicon Valley Bank open new dollar accounts in Gujarat’s Gift City, which caters to non-residents and offshore entities.
The banks set up specialized teams to assist startups in moving funds to their branches in Gift City when a freeze on transactions is lifted for Silicon Valley Bank.
After a run on the bank on Thursday and Friday, US regulatory authorities led by the California Department of Financial Protection and Innovation shut down SVB and appointed the Federal Deposit Insurance Corp. (FDIC) as a receiver.
Due to SVB’s startup-friendly policies, most US startups, and many Indian startups with US subsidiaries, banked exclusively with the bank. Deposits of significant capital from fundraises also tended to be parked with the bank.
They temporarily lost access to their accounts and those deposits after the bank was shut down on Friday night. Some startups took preemptive action hours before US authorities took charge by transferring funds aided by the Indian banks. Not everyone succeeded.
“SVB allowed startups to set up bank accounts in the US without the use of social security numbers. This was one major advantage for non-US residents," a startup founder, who has some exposure in bank deposits in SVB, said.
FDIC provides insurance of $250,000 on each bank deposit, but SVB filings state that 97% of its deposits held capital more than that.
The regulator promised access to the insured deposits on Monday morning. However, many startups were looking to open a second bank account to diversify their funds.
HSBC assembled a team of two dozen executives across markets to work on processing documents, a person familiar with the move said.
“We started getting calls on Friday morning from many VC and PE funds which we already bank with for their portfolio companies and have been working round the clock since then," the executive added.
The team includes executives with expertise in KYC norms, awareness of minimum requirements for opening an account, and expertise over Gift City norms. Banks are able to open accounts within 24 to 48 hours, provided documents are in place.
Ganesh Sankaran, group executive and head of wholesale banking coverage group at Axis Bank, said that the lender saw an opportunity to help startups affected by the collapse of SVB.
“We are actively engaging with these startups to help them park their funds at the Gift City branch of Axis Bank. It also opens doors for further business engagements with these entities in future. A few companies in B2B e-commerce marketplace, large online car marketplace, agri/ food tech space have evinced interest in moving their funds."
Spokespeople for Gift City, Kotak, HSBC and ICICI Bank did not respond to requests for comments on Sunday.
Three investors in startups confirmed that some other Indian banks, such as Kotak Mahindra Bank and ICICI Bank, were also helping open alternative bank accounts in Gift City.
“We are making sure that startup founders will have another US dollar bank out of Gift City so they can quickly change their bank details with their buyers in the US and are able to start receiving new money," an investor with a revenue financing firm said, asking to remain anonymous.
Most of the impacted startups provide software-as-a-Service (SaaS) to US-based clients or have foreign vendors for which they require a US bank account. Startups backed by Y-Combinator also are required to incorporate in the US and open a US bank account —typically in SVB—to receive investor money.
The biggest challenge to opening a bank account in Gift City is a Permanent Account Number (PAN), a second investor said.
“Typically, a PAN number for a foreign entity takes two to three weeks, but some of the Indian banks made certain exemptions, and discussions are on for this issue specifically. Banks have also agreed to conduct Know Your Customer (KYC) over zoom calls," this investor said. “This way, they can start receiving money in two days while the documentation process can continue in parallel," he added.
Most big US banks require physical presence and take anywhere close to a week to open new bank accounts.
Gift City is regulated by the International Financial Services Centre Authority and allows companies to move funds in foreign currency, including the dollar.
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