En Inde, startups lack collateral as well as a profitable financial history. These businesses are at a very early stage, presenting equity risks. This is what pushes banks to be cautious in financing them.

Smita Bhagat , Head of the Governmental and Institutional Affairs Group, HDFC Bank announced that “there are several things that come into play when it comes to financing startups. It depends on the statement of the problem you are trying to solve, the area in which you have chosen to develop the business, the experience of the promoters.” Dipak Gupta , co-managing director of Kotak Mahindra Bank, “from the point of view of credit quality, it's uncomfortable. You can fund the company on its deposits. But pure, unsecured startup funding tends to be a risky proposition, in terms of credit. Our seed loan portfolio is negligible. Even if he is there, it will be against startup deposits .”

According to a notification from the DPIT, “the entity must work to innovate, develop, or improve products, processes, or services, or if it is a scalable business model with high potential for job creation or wealth creation.” Profitable startups generally have no difficulty accessing bank credit. However, banks are reluctant to provide unsecured credit to businesses that are not yet profitable.