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SBI Sets up Rs.200 Cr Fund for Startups Working on Banking Software

Turning its attention from Mallya-related stories and allegations, State Bank of India has decided to reach out to the startups instead in Bangalore where Mallya was its nemesis today.

The state-owned bank has decided to set up a dedicated Information & Technology startup fund of Rs.200 crore to help promising and upcoming ventures in the IT sector with a rider that they focus on banking-related technologies. The fund will provide up to Rs 3 crore for any India-registered company that is seeking initial funding.

"We have created an entity to promote and ensure usage of the funds for the right purposes, the entity could have one or more technical experts on board for advisory roles. The team would provide legal and financial assistance to startups as and when required," said Arundhati Bhattacharya, chairman of SBI at an event of the Confederation of Indian Industry in Mumbai. The fund in a Bangalore branch has enrolled 200 clients already in the last six months, she said.

SBI is under severe criticism for its role in allegedly colluding with Vijay Mallya to whom it gave more than Rs2,000 crore loan for his fancy Kingfisher Airlines that has turned into an NPA and stunned the entire nation. His escape from the cluthes of Indian legal system has become a glaring example of how India blinks knowlingly at those who are charged with money-laundering.

One reader asked, "How can SBI evaluate the potential of a company before giving it the loan? Being a non-IT outfit, he suggested that SBI should not venture into VC-funding unless it guarantees return of the money it is spending.

"Instead of focusing on its core operations SBI seems to be wasting share holders money. How will SBI evaluate a business proposal from a start up? Does it have expertise to do so? These sort of headline-grabbing moves will not add value to its stock. Instead it has to rationalise its operations, stop opening new branches, employ technology to reach out to existing customers. Till then SBI management will not create value," wrote Jayakarthik Sabarathnam.

Another reader Venkatesh Iyengar said: "The success is not in giving loans but in the success of the businesses and the banks getting back the loan amount along with interest." A bank that takes 4 hours or refuses entirely to issue a DD may now take years to grant loan to a startup, added another reader.

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