IDFC First will offer products and solutions, 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 programme".

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The startup banking division, set up about 10 months ago, 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 the phone.

He said that while some organizations treat startups as micro, small and medium businesses (MSMEs) but startups are behaviourally different from MSMEs.

“They are not cash or branch-heavy. Also, the products that work for MSMEs do not work for them," Jatania said.

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 a profit because they invest big time in 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," Jatania said.

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.

“The whole idea is to pay as you grow," he said.