Banks Mull Separate Rating Framework For Startup Risk Profiling
Banks are in discussions with various stakeholders, including rating agencies, government bodies and bank regulators, to create a separate rating framework for startups. This initiative aims to boost credit disbursement to startups and increase the role of banks in financing them. Formal suggestions from the Reserve Bank of India will also be considered in developing this rating framework.
The introduction of a common rating model is expected to expedite loan approval processes and ensure timely credit disbursement to startups. Additionally, it will facilitate a more accurate assessment of startup funding viability, as startups were previously categorised under Micro, Small, and Medium Enterprises (MSMEs). This separate framework will help identify the strengths and weaknesses of funding specific startups.
Given the growing number of startups in India, the government is implementing measures to enhance their access to financing. India hosts the world's third-largest startup ecosystem, and the government has introduced various startup-specific schemes and subsidies to create a favorable environment for these businesses. In September, funding for Indian startups increased by 15 per cent compared to the previous year, with startups raising around a billion dollars across 41 deals.
Venture Intelligence data indicates a rise in investments, driven in part by three deals exceeding USD 100 million each, highlighting the positive growth trajectory of India's startup funding landscape.
