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?

This week has been a whirlwind in the tech industry with significant layoffs, corporate restructuring, legal battles, and innovative launches. Here’s a rundown of the most impactful stories.

Bengaluru’s ReshaMandi Slashes Workforce by 80%

ReshaMandi, a prominent B2B marketplace in Bengaluru specializing in silk yarn products, has laid off 80% of its employees. The drastic downsizing is due to the company’s failure to secure Series B funding. Starting with 500 employees in January 2023, the company has reduced its staff to approximately 100 by the year’s end. Unfortunately, around 300 employees are still awaiting their final salaries and dues.

Meta’s Reality Labs Undergoes Major Restructuring

Meta, the parent company of Facebook, is restructuring its Reality Labs division, splitting it into two new groups: Metaverse and Wearables. This change has resulted in some layoffs, though the exact number remains undisclosed. The Metaverse unit will now focus on Oculus headsets, while the Wearables unit will develop other products, including Ray-Ban smart glasses.

US Government Sues Adobe Over Subscription Practices

The United States Department of Justice (DOJ) has filed a lawsuit against Adobe, accusing the software giant of misleading consumers. The lawsuit alleges that Adobe concealed early termination fees and made it challenging for customers to cancel subscriptions, violating federal consumer protection laws.

GST Discussions for Online Gaming in India Continue

The Indian government is engaged in ongoing discussions regarding the Goods and Services Tax (GST) on online gaming. The debates aim to clarify and potentially reform the taxation framework for this rapidly growing industry. Stay tuned for more updates on GST and online gaming in India.

Google’s Gemini App Launches in Indian Languages

Google has launched its new Gemini app, which supports multiple Indian languages. This initiative aims to enhance accessibility and user experience for non-English speakers in India. Find out more about how Google’s Gemini app is breaking language barriers.

Other Key Tech News:

• Flipkart-Backed BlackBuck Transforms into Public Company: BlackBuck, supported by Flipkart, has officially converted into a public company, marking a significant milestone in its growth journey.
• Peak XV Tops Hurun India Future Unicorn Index 2024: Peak XV Partners leads the latest Hurun India Future Unicorn Index, showcasing its influential position in the Indian startup ecosystem.
• Delhivery and Xpressbees Explore Quick Commerce: Logistics giants Delhivery and Xpressbees are planning to enter the quick commerce space, aiming to leverage the booming market.

Conclusion

This week’s tech news highlights major shifts in the industry, from significant layoffs and corporate restructuring to legal challenges and innovative product launches. Stay informed on these developments to understand their impact on the global tech landscape.