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Government Directs PSBs to Ramp Up Startup Lending Through Incubator Partnerships
News
19 July 2025
2 min read
236
In a bid to strengthen India’s thriving startup ecosystem, the Government of India has urged public sector banks (PSBs) to significantly increase lending to startups. The move encourages these banks to partner with educational institutions and incubation hubs, ensuring early-stage ventures gain access to formal banking channels.
Insiders revealed that this directive was part of the recent performance review of PSBs, where banks were advised to consider launching dedicated startup branches and introduce a custom risk-profiling framework to speed up loan disbursal.
Despite the nation's booming startup sector—ranked third globally—many major PSBs, including Bank of Baroda and Punjab National Bank, reportedly issued no startup loans in FY 2025. The government is now urging these lenders to exchange successful strategies and scale up their support.
To improve deal flow, PSBs are exploring partnerships with leading incubators like Startup India, NASSCOM, and SIDBI, aiming to tap into credible and innovative startup pipelines.
Additionally, the initiative encourages the hosting of annual hackathons at tech institutes such as IITs and universities to source cutting-edge fintech ideas directly from young innovators.
This strategy forms part of the broader EASE reforms aimed at enhancing PSBs’ risk management capabilities and resilience, with a focus on future growth through innovation support.
Why This Matters:
Startups face significant hurdles in securing bank funding, especially in initial stages; this push could lower those barriers.
Formal banking access helps startups establish financial credibility and growth stability.
Collaborating with incubators and hackathons integrates innovation directly into mainstream banking processes.
For PSBs, this is a chance to create new revenue streams and deepen their relevance in a changing financial landscape.
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