Traditional banks are increasingly moving into startup lending as more growth-stage companies become profitable and generate steadier cash flows. According to reports from Mint, this shift is putting pricing pressure on venture-debt funds and NBFCs that previously dominated the segment. HSBC India has already deployed over half of the $1 billion debt capital support announced for startups in 2025, demonstrating the scale of institutional interest in the sector. Dilip Gopinath, who heads innovation banking at the lender, emphasized that banks have become better at understanding startup risks and developing appropriate underwriting metrics for the segment.
Several major lenders have established dedicated startup financing verticals to capture growth-stage companies earlier in their journey. Axis Bank maintains an outstanding credit book of close to ₹3,000 crore for the new economy built over the last five years, as reported by Mint. The bank typically lends to startups in series A stages and above, many of which are still in pre-profit stages. Axis Bank evaluates parameters such as existing cash flows, burn rate, revenue growth, market share, and future runway when assessing startup creditworthiness.
The convergence between traditional banks and alternative lenders is creating pricing pressures in the startup financing market. According to industry executives cited by Mint, traditional banks typically charge around 10% interest rates or lower, while venture debt players serving early-stage startups offer rates in the 14-18% range due to higher risk profiles. Other mid-market entities including NBFCs may charge in the 13-16% range. Ankur Bansal, co-founder of The BlackSoil Group, noted that traditional banks' lower cost of capital makes them the first choice for startups, while alternative lenders provide greater flexibility to maintain blended borrowing rates.
Some banks are developing comprehensive strategies to serve the new economy beyond traditional lending. DBS Bank India announced a lending commitment of $250 million for new-age startups in March 2024, with banking relationships extending beyond lending into transaction banking and investment banking services. As reported by Mint, Axis Bank operates in areas like transaction banking, payment infrastructure, and investment banking through its wholly-owned subsidiary Axis Capital. These full-stack solutions aim to provide startups with diversified financial products as they mature and become more bankable.
The shift reflects the maturation of India's startup ecosystem, with companies gaining predictable cash flows and healthy balance sheets that make them more accessible to traditional banking institutions. According to Mint reports, startups with certain scale and maturity can now access banks' size, diversified products, and deeper understanding of internet-driven business models. Industry executives suggest this convergence is accelerating as more startups demonstrate bankability parameters important for securing equity funding and eventually accessing public markets. The trend indicates a natural evolution from venture capital funding to more traditional banking relationships for growth-stage companies.
