In a striking revelation, Reserve Bank of India (RBI) Governor Shaktikanta Das highlighted a growing concern in the Indian banking sector: bank deposits are lagging behind the surge in loan growth. This imbalance is pushing banks to increasingly rely on short-term non-retail deposits and alternative liability instruments to meet the rising demand for credit—a move that could potentially lead to structural liquidity risks within the system.

The Changing Landscape of Investment Choices

Governor Das pointed out that retail customers are finding alternative investment avenues more appealing, which has contributed to the slower growth in bank deposits. As banks scramble to keep up with the burgeoning credit demand, they are turning to non-traditional sources of funding. This shift, while necessary in the short term, could expose banks to long-term liquidity challenges, raising questions about the sustainability of current lending practices.

Regulatory Concerns and Sectoral Impact

Das also addressed the sectors that had been subject to pre-emptive regulatory measures by the RBI in November 2023. These sectors have now shown signs of moderation in credit growth. However, despite this, certain segments of personal loans continue to grow at an accelerated pace. The governor warned that excessive leverage through retail loans, especially those taken out for consumption, must be carefully monitored from a macro-prudential standpoint.

A significant area of concern is the rapid growth in home equity loans or top-up housing loans, which banks and non-banking financial companies (NBFCs) are aggressively promoting. Similar trends are seen with top-up loans on other collateralized loans, such as gold loans. Das noted that some entities are not strictly adhering to regulatory guidelines regarding loan-to-value (LTV) ratios, risk weights, and the monitoring of fund usage—a situation that could lead to systemic risks if not addressed.

Operational Resilience in the Digital Age

In addition to financial stability, the RBI governor touched on the critical issue of operational resilience, especially in the wake of a recent unprecedented global IT outage that disrupted businesses worldwide. Das emphasized the need for banks and financial institutions to strengthen their IT and cybersecurity frameworks. He also stressed the importance of robust risk management strategies, particularly in third-party outsourcing arrangements, to ensure that the banking sector remains resilient in the face of such challenges.

• How do you think the growing reliance on short-term non-retail deposits will impact the long-term stability of Indian banks?
• What are your views on the rapid growth of home equity loans and the potential risks associated with lax regulatory compliance?
• In the face of increasing cybersecurity threats, how should banks prioritize their IT investments to ensure operational resilience?
• Do you believe that the current trend of alternative investment avenues will continue to outpace traditional bank deposits?
• What steps should the RBI take to ensure that banks adhere strictly to loan-to-value ratios and other regulatory guidelines?

Dutch investment powerhouse Prosus is on the brink of leading a colossal $100 million funding round for the omni-channel jewellery startup BlueStone, sources reveal. This substantial investment is expected to skyrocket BlueStone’s valuation to an astounding $960 million, more than double its previous valuation of $440 million in September 2023.

The funding round will consist of both primary and secondary share sales. Notable VC firms such as Peak XV Partners, Steadview Capital, and Think Investments are also expected to participate. BlueStone is anticipated to secure around $60 million in primary capital, which will be reinvested into business operations, while the remainder will involve early investors selling a portion of their shares.

If finalized, this funding will follow Zepto’s recent $665 million raise, valued at $3.6 billion, underscoring a significant movement in the industry despite a generally subdued deal environment.

Prosus’s Strategic Move

This deal marks a significant milestone for Prosus, which has already invested over $7 billion in unicorns like Meesho and Swiggy. It represents Prosus’s first substantial late-stage investment since mid-2022, having recently focused on Series A deals with companies like Spotdraft and Virgio, as well as supporting portfolio startups such as Urban Company and Captain Fresh.

BlueStone’s Growth Trajectory

BlueStone has shown impressive growth, reporting Rs 788 crore in operating revenue for FY23, a significant increase from Rs 476 crore in FY22. The company has also managed to reduce its losses to Rs 167 crore from Rs 1,268 crore in the previous fiscal year.

Funding Trends in the Indian Tech Ecosystem

According to Tracxn data, the first half of 2024 saw a 13% decline in funding for domestic tech startups, amounting to $4.1 billion compared to $4.8 billion in the same period last year. The number of funding rounds also dropped by 54%, from 989 to 540. However, when compared to the second half of 2023, there has been a slight improvement, with overall funding increasing by 4% from $3.96 billion.

April 2024 recorded the highest monthly funding of $862 million, while January 2023 saw the highest funding of $1.41 billion in H1. This year has seen eight $100 million-plus funding deals, with notable companies like Flipkart, Apollo 24|7, and Meesho raising significant amounts.

1. What are your thoughts on Prosus’s decision to lead a $100 million funding round for BlueStone? How do you think this will impact the jewellery startup’s growth?
2. With BlueStone’s valuation more than doubling, what factors do you believe contributed to such a significant increase?
3. How do you perceive the current funding landscape for tech startups in India, given the recent decline in funding rounds but slight overall funding increase?
4. In what ways do you think BlueStone’s expansion plans will benefit from this new capital infusion?
5. What are your predictions for Prosus’s future investment strategies in the Indian market, given their recent focus on early-stage deals and portfolio support?

After a significant spike in funding last week, investment activity in the Indian startup ecosystem has slowed. Between June 24 and 29, startups raised a total of $196.47 million across 17 deals, reflecting a 75% drop from the previous week’s $800.5 million across 21 deals.

However, this comparison is somewhat misleading. Last week, quick commerce unicorn Zepto alone secured $665 million, accounting for most of the total. Excluding Zepto’s mega-deal, the rest of the ecosystem saw $135.5 million in funding, making this week’s $196.47 million seem less of a drastic decline.

Key Highlights of the Week

1. Largest Funding Round:
   • NBFC Northern Arc secured $75 million in debt funding from FMO, highlighting the fintech sector’s attractiveness. In total, fintech startups raised $77.4 million across three deals this week.
2. Ecommerce Sector Activity:
   • Ecommerce startups led in deal numbers, raising $48.3 million through five deals.
3. Seed Funding Dip:
   • Seed funding saw a sharp decline of 69%, with only $6.9 million raised compared to last week’s $22.7 million.

Major Developments

1. Ather Energy’s IPO Plans:
   • Electric two-wheeler manufacturer Ather Energy is gearing up for a public market debut, transitioning from a private to a public company, as revealed in its regulatory filings.
2. Zepto’s New Funding Round:
   • Following its recent $665 million raise, Zepto is in talks to secure an additional $400 million, potentially boosting its valuation to $4.6 billion, up from $3.6 billion.
3. Finnest’s Major Investment:
   • UK-based PE firm Finnest invested $160 million to acquire a majority stake in cloud kitchen startup Kitchens@, aiming to expand its business operations.
4. Rupeek’s Down Round:
   • Gold loan provider Rupeek is close to raising $24 million in a funding round expected to mix primary and secondary transactions at a valuation of $250 million, a significant 60% cut.
5. Amazon’s Investment in Amazon Pay India:
   • Amazon has infused $72 million into its Indian fintech arm, Amazon Pay India, to bolster its financial services offerings.
6. NODWIN’s Acquisition:
   • Gaming company NODWIN, owned by Nazara, completed the acquisition of marketing services firm Freaks 4U Gaming GmbH in a deal valued at up to INR 271 crore.
7. upGrad’s Debt Raise:
   • Edtech unicorn upGrad is set to raise $34.4 million through the allotment of NCDs and OCDs to EvolutionX Debt Capital, aiming to fund growth and operating expenses.

• What are your thoughts on the recent trends in startup funding?
• How do you see the fintech sector evolving in the coming months?
• Which of these startups do you believe has the most potential for growth?
• What do you think about Zepto’s rapid valuation increase and new funding round?
• Share your insights on the challenges and opportunities for Indian startups in the current economic climate.