NEW DELHI:  Despite the central government’s strong push to support start-ups, India’s fledgling firms are still facing significant trouble with regards to access to funding, with industry representatives stating that banks have been reluctant to extend funding to small firms. 

According to sources in the Union Ministry of Finance, a group of representatives from various start-ups have approached the ministry and flagged concerns that the sector has with inadequate access to funding. “We received a representation from start-ups regarding obstacles in getting funding from banks. The maximum complaints were against private banks. We are looking into it, “ a senior official from the finance ministry said.

During the lockdown, many startups have shut down while many others are using their savings and cash balances to navigate through this crisis. According to a survey jointly conducted by the Federation of Indian Chambers of Commerce and Industry (FICCI) and the Indian Angel Network (IAN) earlier this month, the ongoing Covid-19 crisis has deeply impacted the Indian start-up ecosystem, with close to 12 per cent of start-ups shutting shop.

According to the ‘India Tech Semi-Annual Factsheet’, compiled by Tracxn, only 443 companies were funded in the January-June period this year against 725 companies in the first half of  2019. Many such as Oyo, BookMyShow, Zomato, Swiggy, Ola, Uber, Livspace have also resorted to pay cuts and layoffs. 
Even RBI Governor Shaktikanta Das acknowledged that Covid-19 has impacted funding for start-ups as investors have become risk-averse and the central bank chief has called upon the government to reorient policy focus in this area.