Last Week the World came to know about sudden crash of SVB Bank which has been owed to gradual interest rate hike of over 200 BPS (Basis Points) .
It is Americas Second Largest Bank which has been immediately brought under US Federal Deposit Insurance Scheme. Silicon Valley Bank was founded in 1983 and helped in giving loans and financial assistance to more than half of the US Backed Technology and Healthcare companies.
It is considered to be one of the worst Bank Shutdown after 2008 Crisis. The FED was increasing interest rates post Covid 19 Pandemic to counter inflation. Nobody thought that it will lead to failure of one of the largest Bank of US.
The HIGH Rates constrained the Tech Companies to raise funds further. The Higher Rates reduced the value of treasury and other securities which SVB Bank needed to pay the Depositors. These particularly include startups backed by the famed Silicon Valley accelerator Y Combinator (YC).
The repercussions of the Silicon Valley Bank (SVB) collapse into India’s startup circle is becoming more apparent, with several new and middle ventures banking with the California-based lender finding themselves in a credit /liquidity squeeze for basisc expenses such as salary transfers. 40 YC-backed Indian startups have $250,000 to $1 million in deposits with SVB, while more than 20 of them have deposits of more than $1 million, according to people in the closer circles .
It ultimately leads to the nearest conclusion that rate hike has not been good for such banks so far.
