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SBI launches SBIincube-A Specialized Branch for Start-ups

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State Bank of India (SBI), India’s largest lender, on Thursday opened a specialized branch—SBI InCube—that will cater to the specific financial needs of start-ups.

The branch will assist start-ups in cash management, taxation, regulations, foreign exchange and remittances, mentoring, and other financial services needs. The bank’s initiative comes ahead of the much-awaited start-up policy, which is expected to be announced by the Centre later this week.

However, InCube, in its current form, cannot fund start-ups. “We still believe that we are not giving them financial help because financing is not the only thing that start-ups need. What they need is a lot of financial management advice,” said Arundhati Bhattacharya, chairperson of SBI, adding that the bank is open to the idea of investing in mature start-ups if there are signs of profitability.

The lender also launched SBI Exclusif to offer specialized wealth management services to its customers. The bank has specialized verticals like Corporate Accounts Group (for large corporate entities), Mid-corporate Accounts Group, and National Banking Group (small and medium enterprises, or SMEs) to address the needs of specific business communities.

Although no timeline has been set for the bank to invest in start-ups, SBI expressing interest in funding such entities itself is likely to raise the hopes of many aspiring entrepreneurs.

Currently, start-ups do not qualify for commercial loans of institutional lenders and depend on venture capital firms and angel investors for funding.

In 2015, start-ups raised $7.4 billion in 894 funding rounds, according to data from start-up tracker Traxcn.

“Funding could be done when they become a little more mature or they have sufficient number of orders for scaling the companies. Surely, then they can become good candidates for funding,” said Bhattacharya.

Start-ups have so far steered clear of funding from institutionalized lenders as it would qualify as debt and not equity. “VCs (venture capitalists) and angels have a very large risk appetite which we do not have...so obviously when we are funding somebody, we need to understand how is the money going to be returned. So unless we see our way to getting our money back, it will be difficult. But the moment we have visibility, we can start funding,” she said and added, “once they mature and qualify for loans, we would love to give it (funding) to them.”

In Bengaluru, InCube will be headed by an assistant general manager and a team of three other officers who have experience in managing current accounts, regulations and forex among other functions.

Start-ups will be charged the same fees as SME customers, but any other services from external agencies, including legal advisory, would be charged appropriately, SBI said.

SBI has tied up with investors like chairman of Manipal Global Education Services and Aarin Capital T.V. Mohandas Pai, co-founder and ex-chief executive of Infosys Ltd Nandan Nilekani and software product think tank iSpirt to help mentor and connect start-ups.

It will open InCube branches in Pune and the National Capital Region in the coming months. 

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