The Silicon Valley Bank was among the sixteenth largest bank of the United States, with 17 branches all over in California and Massachusetts. Reportedly, the bank has been shut by the US regulators, and its assets have been sized by the Federal Deposit Insurance Corporation (FDIC) on March 10. The Silicon Valley Bank, known for the lending money to some of the biggest technology start-ups, collapsed in Friday sending its investors and depositors into a turmoil. The Global markets also fell sharpy after the bank shares hit the hardest.Notably, it is the biggest retail banking failure after the global crisis of 2008. The bank had USD 209 billion assets and USD 175.4 billion in deposit ahead of being shut down. It was unclear that how deposits were above USD 250,000 insurance limit at the moment.The shares of Silicon Valley Bank Financial Group, the parent company of Silicon Valley Bank, plummeted nearly 70 percent before trading was halted before the opening bell on the Nasdaq. California regulators close down the SVB and put it under the control of US Federal Deposit Insurance Corporation. Here, US FDIC will act as receiver only, which means that it will liquidate the money and return it back to the customers, depositors and creditors. All insured depositors will have access to their insured deposits by Monday morning, March 13, said FDIC official. They also said that the cheque of old banks will also be honoured after Monday.Silicon Valley Bank made a tremendous profit by investing in tech businesses and then placed the majority of its assets in US Treasuries. The federal reserve started hiking interest rates last year in an effort to reduce inflation rates, which caused bond values to decline. Following the Covid epidemic, startup funding also began to decline, which led to a large proportion of the banks customers withdrawing cash. Silicon Valley Bank was compelled to sell some of its investments even though their value had decreased in order to comply with their requests.After the closure of the Silicon Valley Bank, nearly 175 billion dollar of customer deposits are now under the control of the Federal Deposit Insurance Corporation (FDIC). The FDIC has created a new bank, the National Bank of Santa Clara, which will now hold all the assets of Silicon Valley Bank, as per reports.Silicon Valley Bank is the first FDIC insured organisation to fall this year. Last was, Almena State Bank, Almena, Kansas in October 2020, which was also FDIC insured.Is the closure of Silicon Valley Bank likely to affect IndiaThe fearing of funds was there, start-ups were feeling that funds may get frozen. So, start-up founders and investors were withdrawing funds from SVB and transferring them to other banks.Silicon Valley Bank was trusted name among Indian start-ups. The bank crisis and the news has sent the shock waves in its Indian start-ups, which was already facing funding problems. According to a senior official of Bengaluru based start-up, its failure will have serious implications on the Indian start-ups. The start-ups are now staring at a serious fund crunch. Chief Executive Officer of Finway, Rachit Chawla said, “Fall of Silicon Valley Bank is not good news for the Indian startup ecosystem as it has significant exposure in Indian start-ups. SVB crisis will dent the fundraising ability of Indian start-ups. When it comes to funding, the United States is the biggest source of funds to the Indian start-ups. So, challenge there has a direct impact on the Indian firms.”He further said “Any liquidity tightening may force some startups to wind down their operations. The startups in India were already under pressure as we know that four out of five startups are anyway not generating profits.”
