Start-ups make a beeline for Gift City to move money after Silicon Valley Bank collapse

“Indian banks having branches in GIFT City can open accounts of the holding company based out of the US or anywhere else, and the money can be transferred. Over the last 4-5 days, we have had a phenomenal response from the start-ups as well as some of the private equity/ venture capital firms where they have started opening accounts with us for the same purpose (transferring of their money),” said Anshul Chandak, Head (Treasury) and Chairperson – Governing Body, GIFT IBU, RBL Bank.

He added that the lender had established an online system to make the account opening process easier in its GIFT City branch.

As most of the start-ups are based out of India, having an account in a GIFT City branch will make it easier for them to operate, he said.

GIFT City is the country’s first International Financial Services Centre (IFSC) established for financial institutions to carry out their overseas businesses operated through branches in other countries. The transactions conducted there are permitted only in foreign currency, not rupees.

A total of 13 domestic banks have an IFSC Banking Unit in GIFT City.

Some of the major domestic lenders are the State Bank of India, Bank of Baroda, Punjab National Bank, Axis Bank, HDFC Bank Ltd, ICICI Bank, RBL Bank and Yes Bank.

Earlier this week, Axis Bank said it is actively engaging with these start-ups to help them park their funds in its GIFT City branch.

“In the background of SVB collapse, we saw an opportunity to help the start-ups that could have been impacted. Several Indian start-ups and SaaS companies would have parked the money raised for their Indian business overseas to bring into India as and when they need it for their business purpose. These start-ups typically park their funds with familiar banks they have access to,” the lender’s Group Executive & Head (Wholesale Banking Coverage Group) Ganesh Sankaran, said in a statement.

On Wednesday, The Indian Express reported that the Ministry of Electronics and Information Technology (MeitY) is expected to recommend exploring the option of start-ups being allowed to transfer money from their SVB accounts to Indian banks without facing any taxation issues.

It is also likely to urge the Finance Ministry to allow overseas branches of Indian banks to accept deposits from these start-ups on priority.

According to bankers, the tax will only be applicable when a start-up repatriates the money.

Bankers said the fund, which will flow into the system, could be used to provide foreign currency loans to corporates and inter-bank lending in the forex market and oil companies. These funds will also help reduce the rates on foreign currency loans due to the higher availability of money.