Punjab National Bank chairman and managing director pointed out that Indian financial entities were “contributing minimum to the instability in the global financial markets.
HONG KONG: Indian banks and corporates can teach the world a few things about corporate governance and ethics, in the context of the current turmoil in the global financial market, says Punjab National Bank chairman and managing director KC Chakrabarty.
In an interview to DNA Money on Wednesday, after the inauguration of the bank’s Hong Kong branch, Chakrabarty pointed out that Indian financial entities were “contributing minimum to the instability in the global financial markets… It’s the bigger economies... by infusing more liquidity - unnecessary liquidity - to avoid recession.”
The US subprime crisis and the Societe Generale “rogue trader” losses were the result of a “lack of corporate governance and of a failure to abide by ethical standards”, Chakrabarty noted, and added Indian banks and corporates “can teach something to the global community and to companies” in this area. Excerpts:
On PNB’s strategy of ‘going global’.
Unfortunately, PNB, although a strong domestic bank, has not looked at international operations. We’ve remedied that now - for three reasons. One, to gain international experience and expertise so that we can compete better in the domestic market. Two, to follow our clients, Indian corporates and individuals, who are going global. If we don’t, we may lose them in the international - and even domestic - markets. Third, by 2050, the Indian economy will be among the three largest in the world, and I cannot wait until then to go out. I have to lay the foundation today.
The risks of venturing into turbulent global financial markets:
Our regulations are world-class. Globally, the RBI is seen as a very good regulator. In any case, Indian banks and corporates can teach something to the global community and to companies about corporate governance and adherence to ethical standards.
All the current financial crises - the subprime crisis and the SG ‘rogue trading’ - did not come about because of lack of regulation but because of lack of corporate governance and failure to abide by ethical standards. In my bank, my salary is not determined by the profits my company generates, and that I believe is a good thing: it keeps me from pursuing profits above all else.
Eventually, you can have the best systems, but events like this will continue to happen. Regulation will always follow the violation. We have to increase our shock absorption capacity.
On the choice of Hong Kong:
There’s no better place than Hong Kong for us to launch our international operations: it has the most liberalised financial environment Hong Kong is also our gateway to China. If we combine India’s trade with Hong Kong and China, it’s our largest trading bloc today, surpassing trade between India and the US, and will increase significantly.
What PNB has to offer:
If businesses want to penetrate the Indo-Gangetic basin, they cannot ignore PNB. Which is why we are here: We will add value between India and Hong Kong and China.
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