- IDFC First will offer products and solutions for startups including a zero-balance startup current account, working capital solutions for pre-profit startups, business credit cards for startups with step-up credit, and a tailored founder success program
Mumbai: Private sector lender IDFC First Bank is looking to grab a sizable pie of the up-and-coming startup banking segment and has tied up with tech industry lobby body Nasscom’s centre of excellence as a preferred banker to new-age companies.
The bank and the centre of excellence have recently signed a memorandum of understanding. IDFC First will offer products and solutions for startups including a zero-balance startup current account, working capital solutions for pre-profit startups, business credit cards for startups with step-up credit, and a tailored “founder success program", among others.
Set up about 10 months ago, the startup banking division at IDFC First comprises 18 people and is headed by Bhavesh K Jatania. “Traditional banking structures will not work with new-economy companies. Legacy structures were created around traditional organizations but we needed structures that were horizontal, helping startups throughout the lifecycle," Jatania said over phone.
He said that while some organizations tend to treat startups as micro, small and medium businesses (MSMEs), startups are behaviourally different from MSMEs. “They are not cash or branch-heavy. Also, the products which work for MSMEs do not work for them," said Jatania.
For instance, under a working capital programme for an MSME, one would look for at least three to four years of existence and profitability, however, for startups, that would not work, he said.
“They do not make profit because they invest big time on growth. We have a working capital programme for growth-stage startups where an idea has been validated and established. We do not look at traditional parameters like profitability and all, but at parameters like revenue traction and certain other assessments," said Jatania.
Speaking about the new current account, he said that early-stage startups are capital-starved and for them the bank has introduced a current account where almost all services are free for three years.
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