The collapse of the US-based Silicon Valley Bank (SVB) may reduce the availability of global funds for Indian startups at a time when the startup ecosystem is reeling under the ongoing funding winter, the Reserve Bank of India (RBI) reportedly told a parliamentary panel.

However, the central bank also added that as per media reports, the impact of the bank’s collapse on the Indian startup ecosystem seems to be limited, ET reported.

RBI executive director Ajay Kumar Choudhary, Department of Financial Services secretary Vivek Joshi, officials from the Department for Promotion of Industry and Internal Trade (DPIIT), SBI MD Alok Kumar Choudhary and the Indian Venture & Alternate Capital Association (IVAC) deposed before the the parliamentary standing committee on finance on Monday, the report said.

Owing to rate hikes and tight liquidity conditions globally, the venture capital industry has been revaluating investments, the RBI said in a presentation to the panel.

“In India too, the fundraising activity already declined 35% from $37.20 Bn in 2021 to $24.70 Bn in 2022. SVB’s collapse might contribute to this trend and availability of global funds to Indian startups may take a pause in the short run,” the central bank added.

The central bank also informed the panel that SVB has two non-financial subsidiaries in India – SVB India Advisors Pvt Ltd (SIA), which is involved in legal, loan operations, accounting, book keeping, auditing, among others, and SVB Global Services India LLP, a non-banking company that is primarily a technical and engineering solutions provider. 

BJP MP Jayant Sinha, who is the chairperson of the panel, told the publication that the meeting was satisfactory.

“The committee had a very engaging set of discussions on the collapse of important financial institutions in the US and Switzerland, and analysed their implications for India’s financial system and startups,” Sinha was quoted as saying.

Sinha added that Indian startups are looking to diversify their dollar deposits to financial institutions in GIFT City in Gujarat.

The members and officials agreed on the need for specialised financial services for Indian startups, Sinha said, adding that many of India’s financial institutions are setting up specialised branches and products for startups. 

The comments come at a time when the startup ecosystem is struggling due to the funding winter, resulting in layoffs and shutdowns. As per Inc42’s layoff tracker, Indian startups have laid off over 23,000 employees since 2022.

According to Inc42, the funding raised by Indian startups plunged 75% to $3 Bn in Q1 2023 from $12 Bn in Q1 2022. The overall deal count declined 58% to 213 from 506 in the year-ago quarter.