{"id":33393,"date":"2023-03-12T09:19:46","date_gmt":"2023-03-12T03:49:46","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=33393"},"modified":"2025-06-30T12:07:11","modified_gmt":"2025-06-30T06:37:11","slug":"silicon-valley-banks-failure-causes-and-implications","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/silicon-valley-banks-failure-causes-and-implications\/","title":{"rendered":"Silicon Valley Bank&#8217;s Failure: Causes and Implications"},"content":{"rendered":"<h3><strong>What\u2019s in today\u2019s article?<\/strong><\/h3>\n<ul>\n<li><strong>Why in News?<\/strong><\/li>\n<li><strong>What is SVB and How Big is it?<\/strong><\/li>\n<li><strong>What went Wrong at SVB?<\/strong><\/li>\n<li><strong>What Implications might there be for India?<\/strong><\/li>\n<li><strong>What Implications might there be for the World Economy?<\/strong><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>Why in News?<\/strong><\/h2>\n<ul>\n<li>The California-based Silicon Valley Bank (SVB), a cornerstone of the US technology and startup industries, recently failed, making it the biggest bank failure since the 2008 financial crisis.<\/li>\n<\/ul>\n<p><strong>\u00a0<\/strong><\/p>\n<h2><strong>What is SVB and How Big is it?<\/strong><\/h2>\n<p><img decoding=\"async\" src=\"https:\/\/lh6.googleusercontent.com\/KWaUp5deccrDRHw91HzxkYaipe_b0NbwZ_6RBpMbdjcM04xWnTny1c57BOtVNXHVOJ_TAGM9cOHjvejGXCdivuPwYMQdRViqHfccsWhCQzW-ozLIcPBWiJqy3Y4QJ2FpmFBKkbyo2Idd\" alt=\"\" \/><\/p>\n<p>Image Caption: Silicon Valley Bank<\/p>\n<p><strong>\u00a0<\/strong><\/p>\n<h2><strong>What went Wrong at SVB?<\/strong><\/h2>\n<p><img decoding=\"async\" src=\"https:\/\/lh5.googleusercontent.com\/M6Bgqt25t5gbjvn5Esg1pfVwfI1Z9imSPzCuthV_Vv7MxcqEj-ZMxjhcC20c98X8Ny4UVE6W1UaypgbV2Tqk9vWiz4iL8Pz3kmdPl1FU8SBidESpxugUmuiM4SVMCajDVTOVjpQ-ho1w\" alt=\"\" \/><\/p>\n<p>Image Caption: Timeline of Events that led to the failure of Silicon Valley Bank<\/p>\n<p><strong>\u00a0<\/strong><\/p>\n<h2><strong>What Implications might there be for India?<\/strong><\/h2>\n<ul>\n<li>The tech industry is the biggest customer of SVB with <strong>a large number of Indian start-ups, especially in the SaaS<\/strong> (software as a service) sector that services US clients, having accounts at the bank.<\/li>\n<li>Aside from being a banking partner, SVB had also been <strong>an important lender to several Indian start-ups<\/strong> when the sector in India was starting to take shape around 2010-11.<\/li>\n<li>Among its most notable fundings was an investment of <strong>a total of $1.7 million in One97 Communications<\/strong>, the parent company of <strong>Paytm<\/strong>. Other start-ups that had received funding from SVB include <strong>Bluestone and Carwale<\/strong>.<\/li>\n<li>While the impact of SVB\u2019s failure will be clear in coming days, many founders said that <strong>not being able to take out more than $250,000<\/strong> from their accounts will hit them hard.<\/li>\n<li>Amid a funding winter, where availability of funds for start-ups is dwindling, this could prove to be <strong>a major roadblock, especially to young businesses.<\/strong><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>What Implications might there be for the World Economy?<\/strong><\/h2>\n<ul>\n<li>SVB is small by comparison with the nation\u2019s largest bank &#8211; JPMorgan (with assets worth more than $3 trillion).<\/li>\n<li><strong>A systemic bank crisis\/bank runs<\/strong> happens when depositors lose trust in many banks and start withdrawing their deposits, preferring to keep hard cash with them.<\/li>\n<li>This is precisely what happened in 2008, when rumours about bank collapses in the US spread to <strong>India <\/strong>too and panicked depositors pulled money from private sector banks.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<hr \/>\n<h3><strong>Q1) What is the 2008 global financial crisis?<\/strong><\/h3>\n<p>It refers to the period of extreme stress in global financial markets and banking systems between mid-2007 and early 2009. A downturn in the US housing market was a catalyst for a financial crisis that spread from the US to the rest of the world through linkages in the global financial system.<\/p>\n<p><strong>\u00a0<\/strong><\/p>\n<h3><strong>Q2) What is meant by a bank run?<\/strong><\/h3>\n<p>A bank run occurs when many customers withdraw all their money simultaneously from their deposit accounts with a banking institution for fear that the institution is, or might become, insolvent.<\/p>\n<p>&nbsp;<\/p>\n<hr \/>\n<p><strong>Source:\u00a0<\/strong><a href=\"https:\/\/www.thehindu.com\/news\/international\/explained-what-caused-silicon-valley-banks-failure\/article66606700.ece\" target=\"_blank\" rel=\"nofollow noopener\"><u>Explained | What caused Silicon Valley Bank&#8217;s failure?<\/u><\/a>\u00a0|\u00a0<a href=\"https:\/\/indianexpress.com\/article\/business\/funding-winter-indian-tech-industry-silicon-valley-bank-collapse-8490807\/\" target=\"_blank\" rel=\"nofollow noopener\"><u>IE<\/u><\/a>\u00a0|\u00a0<a href=\"https:\/\/economictimes.indiatimes.com\/tech\/newsletters\/ettech-unwrapped\/the-collapse-of-silicon-valley-bank-and-its-impact-on-indian-startups\/articleshow\/98554339.cms?from=mdr\" target=\"_blank\" rel=\"nofollow noopener\"><u>ET<\/u><\/a><\/p>\n<p><strong>Video:\u00a0<\/strong><a href=\"https:\/\/www.youtube.com\/watch?v=UraMIKY2CkI\" target=\"_blank\" rel=\"nofollow noopener\"><u>https:\/\/www.youtube.com\/watch?v=UraMIKY2CkI<\/u><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>California-based Silicon Valley Bank recently failed making it the biggest bank failure since 2008 financial crisis.<\/p>\n","protected":false},"author":5,"featured_media":33394,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18],"tags":[],"class_list":{"0":"post-33393","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-mains-current-affairs","8":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/33393","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=33393"}],"version-history":[{"count":0,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/33393\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/33394"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=33393"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=33393"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=33393"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}