KL Mukesh, now a social entrepreneur and venture capital investor in an earlier avatar, says, “The odds are, an Indian startup with funds in SVB would have been funded by a US venture capital fund, the company would be registered in the US and will pay a bulk of its taxes in the US (of course there will be exceptions). It will be far better if the Indian government stays out of this. We will not be effective and there is a moral hazard issue of the Indian tax-payer bailing out such entities.”

More simply, imagine, an American company with an Indian subsidiary. It will be treated as an Indian firm. For all its banking requirements, it will have an account in an Indian bank. Now, if this Indian bank goes belly up, to expect the White House to step in along with officials from the US Federal Reserve to ‘rescue’ the Indian company will be naïve. If anything, the parent company must sort the problem out its subsidiary faces with the Indian government and the Reserve Bank of India (RBI).

Krishna Jha, a Bengaluru-based investor, agrees with Mukesh. “Startups based in the US and US-based subsidiaries were affected. These would comprise mostly companies who either have a presence in the US or are domiciled there. Indian startups are not directly impacted as they wouldn’t have a bank account in the US.”

Clearly, the Indian government has nothing to do here. But the official stance as articulated by Rajeev Chandrashekar, MoS, Electronics & IT late on Thursday night in a conversation on Twitter Spaces was that while it is true SVB has a long history, those in the government thought of this as an opportunity to build a relationship with Indian companies setting up subsidiaries in the US. His point was that back-of-the-envelope calculations suggest a few billion dollars in early-stage entrepreneurs of Indian origin were serviced by SVB. Why not bring that into Indian banks?

But that will take some doing. SVB has been around for four decades and earned a reputation for doing all the right things start-ups needed. “They did more for Silicon Valley than the premier American banks,” points out Jha. The minister acknowledged this and pointed out that if the SVB model can be emulated by Indian banks with branches abroad, there’s no reason why start-ups would need to go elsewhere. If anything, Indians must learn to emulate what SVB did.

If that is the case, then why did SVB go belly up? A caustic note put out by the Sovereign Research & Advisory Group lays it out in detail. The bank loaded up the deposits it soaked up from investors and placed its long-term funds in US Bonds and short-term funds in T-Bills that are widely thought of as the safest of instruments to invest in.

SVB loaded up on long-term government bonds when interest rates were much lower at close to 2%. Since then, the interest rates have more than doubled to rein in inflation. But as far as SVB was concerned, interest rates hikes on bonds it purchased meant losses. This is true for all other banks as well and we are witnessing the resultant turmoil. These things have been known to happen but this time around, it started getting discussed by prominent investors on Twitter. The chatter there created panic that eventually led to a run on SVB. That takes us to the first lesson: Ignore social media narratives.