Govt tells state-run banks to start up lending game
public sector banks
(PSBs) to step up lending to startups. They have been asked to collaborate with educational institutions and incubation centres to identify and monitor early-stage startups to establish formal banking linkages, said people familiar with the development.
'These issues were a part of the discussion during the performance review meeting of banks in June,' said an official who didn't want to be identified. 'We have asked banks to look at other measures, including specialised branches, to ensure that such ventures get credit support.'
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The country's biggest state-owned banks such as
Bank of Baroda
,
Punjab National Bank and Central Bank of India
did not sanction any loans to startups in FY25. 'This needs to change, and banks can learn best practices from each other to scale up lending,' said the official.
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The recommendations have been underscored in follow-up meetings of finance ministry officials with banks on progress made and action taken in the past month.
A bank executive said lenders are already exploring tie-ups with leading incubators such as Startup India, Nasscom and Sidbi for credible pipeline sourcing.
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'We have also made a case for a separate rating framework or model for risk profiling startups, and it is being discussed internally among banks,' he said.
Annual Hackathons
A common rating framework will help in risk assessment and lead to early sanctions, said the bank executive.
India has the third-largest startup ecosystem in the world and is expected to witness consistent annual growth of 12-15%, according to government data.
In the past, the government has made a case for startups to lower their reliance on funding from overseas lenders and explore the Indian banking system as part of their organisational framework.
The government has also asked banks to conduct annual hackathons in association with the Indian Institutes of Technology (IITs), universities and science institutions as a part of an initiative to develop and encourage new initiatives in the fintech sector.
In her review meeting in June, finance minister Nirmala Sitharaman had urged PSBs to proactively identify emerging commercial growth areas for the next decade that can bolster profitability and growth.
Lenders were also asked to deepen corporate lending in productive sectors, with a strong focus on maintaining robust underwriting and risk-management standards.
Under the
EASE reforms
agenda for FY26, the core focus will be on fortifying risk management systems of PSBs, enhancing their capacity to absorb economic shocks and upholding financial stability, according to the Indian Banks' Association's latest report. EASE is the Enhanced Access & Service Excellence programme of the Department of Financial Services aimed at improving PSBs.
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