Amid the collapse of three American banks - Silicon Valley Bank (SVB), Signature Bank and Silvergate Capital Corp, Zerodha founder Nithin Kamath said that the lesson to be learnt from such crises is to distribute funds across several banks. Taking the example of the crash of Yes Bank for Indians, he said it is important to ensure working capital is placed in a bunch of banks. Calling pessimism a factor that is often overlooked while running a business, he explained the importance of being aware of risks and knowing how to alleviate its impact.
He tweeted, “The lesson from SVB or Yes Bank in the Indian context is to have funds, especially working capital, distributed across a bunch of banks.”
He further wrote, “Consider everything a risk and do everything you can to mitigate it. Every business will be exposed to a black swan event at some point; the idea is to survive those.”
Also read: A timeline of how Silicon Valley Bank collapsed in just 48 hours
From unforeseen changes to market fluctuations and losing access to funds in the bank, which is the current situation with the collapse of SVB, the startup founder noted that the number of things that can go awry while handling a business is astonishing.
{{/usCountry}}From unforeseen changes to market fluctuations and losing access to funds in the bank, which is the current situation with the collapse of SVB, the startup founder noted that the number of things that can go awry while handling a business is astonishing.
{{/usCountry}}Also read: For this tech startup founder, SVB collapse affects ‘parents putting dinner…’
On Friday, the financial world woke up to the shocking news of the shutdown of the 16th largest lender in the United States, considered as the biggest bank failure since the Washington Mutual fell more than a decade ago.
On Monday, HSBC agreed to buy the UK arm of the collapsed SVB for a nominal consideration of £1 or around ₹99 in a deal organised by the Bank of England and the UK Treasury. According to a Bloomberg report, HSBC said the deal will complete immediately and will be funded from existing resources.
(With inputs from agencies)