Business

Indian Bank eyes lending to start-ups

Lender plans to set aside ₹100 crore for the purpose, to run six-month pilot

Public sector lender Indian Bank is mulling the option of lending a helping hand to start-ups, said a top official.

“Instead of lending ₹100 crore to corporates, which carries a higher risk, let us give ₹10 crore each to 10 start-ups, where the risk is less and spread out,” said Padmaja Chunduru, managing director and chief executive officer, Indian Bank.

The idea to help start-ups, as a new activity, emerged at one of the town hall meetings Ms. Chunduru had with the officials of Allahabad Bank and Indian Bank in the last few months. Allahabad Bank is set to merge with Indian Bank on March 31.

“The merger gives birth to a new legal entity. With the new identity comes new ideas from new team members and we would like to test the waters. Going forward, we would like to use digital as a platform,” said Ms. Chunduru.

Though the bank plans to set aside ₹100 crore to ₹200 crore for this purpose, it wants to run this scheme on a pilot basis at least for six months. It is also planning to forge tie-ups with venture capitalists or private equity firms to understand the industry better.

“We are not taking part in the equity portion. It would be fully debt. It is based on the working model of Silicon Valley Bank and we will be the first bank in the country to help a start-up,” she said.

Gopal Srinivasan, chairman and managing director of TVS Capital Funds, welcomed the idea and said that there were three types of start-ups — emerging, emerged and speculative.

“Some of the start-ups might go for debt route from the second round itself and others might stretch it by diluting their equity. Lending, based on track record, might not be a good option, since most of these firms keep raising funds at regular intervals,” he said.

“If the scheme is successful, then we will place it under a different vertical,” Ms. Chunduru said.

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Printable version | Apr 9, 2020 4:02:36 AM | https://www.thehindu.com/business/indian-bank-eyes-lending-to-start-ups/article30863758.ece

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