Its high time the US revisited their banking regulation system, said Gopal Srinivasan, Chairman and Managing Director of TVS Capital Funds on the backdrop of the Silicon Valley Bank fallout.
On March 13, US President Joe Biden sought to reassure Americans that they can have confidence that the US banking system is "safe" and vowed stricter bank regulation after a string of bank failures raised concerns about the nation's financial stability.
The president's comments came after US bank regulators spent the weekend working on a plan to shore up the public's confidence in the soundness of the financial system and limit spillover effects following the closing of the Silicon Valley Bank last week.
In an interview with CNBC-TV18, Srinivasan said that its hightime now the United States should revisit their banking regulation system and make it much more aligned with today's fast moving digital world.
Speaking about the banking assets in India, he said most of the banking assets in India are potentially the top 10 banks.
"Every call to action requires a calamity. This calamity (SVB collapse) I am sure is making the US regulators rethink what should be the regulatory framework as far as banks are concerned, " he added.
Also Read | A blow-by-blow account of how and why SVB collapsed
Comparing with India's banking system he speaks about how the Reserve Bank of India (RBI) is the regulator, lender and also is owned by the government.
He also questioned why most venture capitalists (VCs) allowed this kind of concentration of startup treasuries dedicated to a single bank. "It is quite amazing that the stranglehold grip that the Silicon Valley Bank had on VCs and startups, whether it is because they offered venture deck or they were a large fund of funds manager, is something I don't understand fully," he said.
For the TVS Capital Funds' chief, the larger issue in the whole SVB fallout scenario is the regulatory mechanism.
"It (SVB) was ranked the fifth best bank in America, it pioneered the banking to the startup system but since it was close to everybody, that there was no requisite assessment that was needed," he added.
"As I read the FDIC notice, all the startups who have treasury funds there will get their money. That is assured by the FDIC and Janet Yellen, (the US Treasury) after she spoke to the the President on Monday," he said.
"The longer term issue is whether they will be able to raise the venture debt," he added.
Srinivasan believes that there will be more startups that will reverse their domicile back to India. He gives the example of PhonePe and how they reversed their domicile from Singapore to India. "India perhaps has a tough regulator but a regulator that gives us ability to sleep peacefully at night like RBI and domicile more in India," he said.
Lastly, he lists out three things the government should think about with respect to the startup culture -
- Make startup investment in India easier, particularly on the ESOP front.
- Make sure domestic regulations related to AIFs are made simpler and funds have more flexibility to operate
- Examine carefully the startup listing.
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