The Reserve Bank of India’s recent directive restricting banks and financial companies from investing in venture funds that support startups sharing a borrowing history is sending shockwaves through the startup ecosystem. This move, aimed at curbing financial institutions’ use of alternative investment funds to navigate bad loans, raises concerns of a potential setback in startup funding. With domestic venture capital firms, often backed by banks, expected to bear the brunt, there’s a growing call for a nuanced approach to address bad practices without stifling the essential flow of capital. Startups are now engaging with regulators, hoping for adjustments that prioritize transparency and sustain the momentum of innovation in the entrepreneurial landscape.
