Indian Overseas Bank (IOB), a major public sector bank in India, is set to enter the startup lending space. This strategic move involves the establishment of an exclusive startup branch, initially in Chennai, Tamil Nadu, with operations expected to begin before the end of March 2024. This branch will focus on creating financial products specifically tailored to meet the unique needs of startups.
The Managing Director and CEO of IOB, Ajay Kumar Srivastava, has detailed the bank’s approach, highlighting that this is their first foray into startup financing. The bank is committed to devising products and services that cater to the specific requirements of startups. They are targeting a startup portfolio of Rs 500 crore in the first year of operations in FY25. Following the launch in Chennai, IOB plans to expand these specialized startup branches to other major Indian cities like Bengaluru, Hyderabad, and Mumbai.
IOB is actively engaging with startups across various sectors, including drones, food processing, and information technology. They are also in discussions with a prominent higher education institute in Chennai to collaborate on identifying startups in need of financial assistance. The aim is to support both existing and emerging startups, with policies being formulated to this end.
This initiative by IOB is a significant development given the context of India’s startup ecosystem. India has emerged as the third-largest startup ecosystem globally, with over 112,718 startups recognized by the Department for Promotion of Industry and Internal Trade as of October 2023. Particularly in Tamil Nadu, the number of registered startups has tripled between 2021 and 2023, reaching 6,800 as of August 2023.
Srivastava expressed confidence in the timing of IOB’s entry into the startup space. He noted that this is an appropriate time as the bank has observed the evolution of the startup landscape over the past few years, and IOB itself is in a financially stable position. The move aligns with the growing momentum in the startup landscape and reflects IOB’s commitment to supporting entrepreneurship and contributing to the growth of the startup ecosystem in India.