Banks warm up to startup lending as new economy matures; HSBC India deploys over half of $1B debt support, Axis Bank builds ₹3,000 crore credit book

Banks are increasingly warming up to startup lending as the new economy matures, with HSBC India deploying over half of its $1 billion debt support and Axis Bank building a ₹3,000 crore credit book.¹²⁴

In March 2024, DBS Bank India announced a lending commitment of $250 million for new-age startups.³⁷

"We are seeing traditional banks step up in a big way to lend growth stage startups as they look to grow their corporate books. Given their lower cost of capital, they have become the first port of call for startups," said Ankur Bansal, co-founder & managing director of The BlackSoil Group.⁵

Banks have developed a deeper understanding of internet-driven business models, with many now having specialist teams to evaluate the unique risks associated with startups.

Dilip Gopinath, who heads innovation banking at HSBC, stated, "We have specialist teams across the business and risk functions to understand the nuances of startups and, accordingly, calibrate our credit appetite on an ongoing basis."

Axis Bank's credit book for the new economy has grown significantly, with many startups still in their pre-profit stages.

Sanjiv Bhatia, group head at Axis Bank, noted, "For many of our clients, their loan book from banks has substantially increased, but the number of lenders across banks and non-banks has also expanded from a risk mitigation perspective."

The competitive landscape has led to pricing pressures, prompting banks to offer more flexible terms while maintaining rigorous credit selection processes.⁶

Overall, the shift in lending dynamics reflects a growing confidence among banks in supporting high-growth startups, which is crucial for the evolving economic landscape.