- The collapse of Silicon Valley Bank is causing collateral damage that’s sinking markets and delaying paychecks.
- The Indian government will not let the SVB crisis affect the growth of Indian start-ups-Minister assures.
- The start-up friendly policies of Silicon Valley Bank led to many new Indian enterprises parking substantial funds with it.
- The government is likely to exempt certain categories of investors, such as those registered with regulatory authorities and whose chances of circulating unaccounted money are low, from the proposed angel tax.
The collapse of Silicon Valley Bank is causing collateral damage that’s sinking markets and delaying paychecks. Start-up founders, CEOs, and investors are in a huddle to find solutions and even governments are stepping in. The Indian government will not let the SVB crisis affect the growth of Indian start-ups, junior electronics minister Rajeev Chandrasekhar said. The ministry may meet its advisory group on e-commerce and cyber laws to discuss the matter. This came in hours after the British government said it was working to limit the damage to the technology sector.
The start-up friendly policies of Silicon Valley Bank led to many new Indian enterprises parking substantial funds with it. Anxiety over the meltdown has snowballed over the weekend as over a thousand local start-ups have exposure in SVB.
Three Indian banks, Axis Bank, Kotak Mahindra Bank, and ICICI Bank, along with the Indian unit of HSBC, assembled teams to work through the weekend to offer a lifeline to start ups affected by the collapse of Silicon Valley Bank by opening new dollar accounts in Gujarat’s Gift City, which caters to non-residents and offshore entities. The banks set up specialized teams to assist start-ups in moving funds to their branches in Gift City when a freeze on transactions is lifted for Silicon Valley Bank. Local banks offer help to domestic start-ups hit by the collapse of Silicon Valley Bank.
Many Indian start-ups with US subsidiaries banked exclusively with SVB. Deposits from fundraisers are often parked with it. The Gift City route may help some of the Indian start-ups to save their businesses from ruin.
The government is likely to exempt certain categories of investors, such as those registered with regulatory authorities and whose chances of circulating unaccounted money are low, from the proposed angel tax. These could include funds qualifying as foreign portfolio investors and foreign venture capital investors registered with the Securities and Exchange Board of India, and entities registered with the Reserve Bank of India. The revenue department is expected to notify the regulatory framework with a list of exempted entities along with valuation rules for the new tax by April 15.
The rationale for exemptions is that the government wants to curb the circulation of illicit money as share premium, and not to tax legitimate investment. Foreign entities compliant with Indian laws would therefore be kept outside the ambit of the so-called angel tax.
