Shreyans Jain, co-founder of Manicule, recently criticized Indian banks for “credit starvation,” arguing that strict documentation hampers innovation. While the comment highlights a gap in lending risk, industry data shows Indian banks are navigating a balance between driving credit growth and maintaining strict asset quality standards.
Shreyans Jain, the US-based co-founder of Manicule, has sparked a conversation regarding the accessibility of business loans in India. In a recent post on the social media platform X, Jain argued that Indian banks exhibit excessive caution and require burdensome documentation, which he described as “credit starvation.” He contrasted this with his experience in the United States, where he suggested that lenders are more willing to take calculated risks on borrowers based on credit scores.
Jain’s argument centers on the idea that this restrictive approach limits the ability of Indian entrepreneurs to build large-scale, global businesses. He pointed to the extensive paperwork often required by Indian lenders, including income tax returns, CA-certified net worth statements, and detailed financial audits, as a barrier to rapid growth.
From an investor and banking perspective, however, the situation involves a complex trade-off between growth and risk management. Indian banks operate within a highly regulated environment, with the Reserve Bank of India (RBI) mandating strict underwriting standards. These rigorous documentation requirements are largely a result of lessons learned from previous cycles of high bad loans, or Non-Performing Assets (NPAs). Unlike equity-based venture capital, which accepts high failure rates in search of massive returns, traditional bank loans are funded by depositor money. This fiduciary duty forces banks to prioritize the safety of capital and the ability of the borrower to repay, rather than prioritizing speculative or high-risk growth models.
Market data from 2026 indicates that the Indian banking sector is not generally experiencing a decline in lending. In fact, banks have been reporting robust credit growth throughout the year, with significant expansion in retail and SME lending. The sector has been actively digitizing its processes, with many lenders adopting AI-driven underwriting models to speed up approvals and assess creditworthiness more effectively without compromising on safety.
For investors, the contrast highlighted by the debate lies in the difference between capital sources. Tech giants and innovation-led startups often rely on equity funding and venture capital during their early stages because their business models may not yet generate the stable cash flows required for servicing traditional debt. As companies mature and generate predictable revenue, they typically gain better access to bank credit. Therefore, the reliance on bank loans for early-stage startup growth, as suggested in the critique, is often not the standard model in the US or elsewhere, where venture capital plays the primary role.
The future focus for the Indian banking sector remains on maintaining this balance. Investors may track how banks continue to integrate digital technologies to reduce documentation hurdles while keeping default risks under control. As the economy grows, the challenge for lenders will be to support expanding businesses without repeating the credit excesses that previously harmed the sector’s financial health.