A prominent part of Citibank’s Indian franchise was retail. Now that you are out, what’s the road ahead when most peers are doing the same corporate and institutional business?
Our institutional business in India is one of the most important we have globally. While we operate in 95 countries, not every country has all the offerings. Here, the business is well balanced with a full-service offering with treasury and trade solutions, markets, securities services, investment banking, and corporate and commercial banking. India is one of the top three multinational businesses for us. India’s importance to the global economy will draw in more MNCs. ‘Make in India’ and schemes such as PLI are attracting investments.
What impression are you getting from Indian companies? One disappointment has been the lack of capacity expansion. Do you have a pulse on it?
The bullishness we are seeing from clients in India is amongst the best globally. We are observing companies in the metal and steel sectors embark on capital expenditures. Auto companies are making significant investments in electric vehicles, not just 2- and 3- wheelers but also 4-wheelers. The auto sector will see massive change. Through our discussions, we believe significant investments are being planned and are set to be announced over the few quarters.
The bullishness is still not translating into action on the ground…
[There are] three observations that are incredibly positive for Indian corporates. First, they are more professionally managed, there are real efforts to deleverage and focus on core business, including incorporating ESG plans. Second, are government policies favouring growth and companies aspiring to go overseas. Third, companies are well-positioned to take on the opportunity as global trade flows realign to India.
What about your clients? How are they reacting or looking at the India vis-a-vis China battle play out?
Many companies are diversifying their businesses to protect supply chains in the aftermath of the pandemic and India is one of the countries that have benefited.
With central banks raising rates globally, what are the emerging risks?
The world has changed a lot after the pandemic. Capital markets are sensitive to the ongoing geopolitical situation. Forex volatility has increased, and capital outflows are higher. In addition, rising inflation is prompting central banks to act immediately, while commodity prices remain heightened. Credit risks are not high. Liquidity is not a problem. While high inflation will squeeze margins, it is unlikely to be a long-term challenge.
In the current market scenario what worries you as a risk manager?
I am watching the global commodity prices and the Russia-Ukraine developments. Inflationary pressure stemming from this conflict is high. The flip side is India can stand to benefit from the realignment of global trade.
We have seen blow-ups such as Greensill and Archegos? What is the worst-case scenario?
As we all know, there were massive bubbles on the back of inflated asset prices during the global financial crisis. This time, we are miles away from such asset pricing and more importantly, credit quality has not worsened.