Mumbai: What has taken a number of us by surprise is the lack of adequate supervision and regulation,” Rana Kapoor was saying the other day. “This was despite the fact that Enron had happened and you passed Sarbanes-Oxley. We don't understand it. Maybe it's because we sit in a more controlled economy but...” He smiled sweetly as his voice trailed off, as if to take the sting off his comments. But they stung nonetheless.
Kapoor is an Indian banker, a former longtime Bank of America executive with a Rutgers MBA, who along with his business partner and brother-in-law, Ashok Kapur, was granted government permission four years ago to start a private bank, which they called Yes Bank Ltd.
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In the United States, Yes Bank is the kind of name a go-go banker might give to, say, a high-flying mortgage lender in the middle of a bubble. (You can even imagine the slogan: “Yes is part of our name!”) But Yes Bank is not exactly the Washington Mutual of India. One news release it hands out to reporters who come calling is an excerpt from a 2007 survey by The Financial Express: “No. 1 on Credit Quality amongst 56 Banks in India,” reads the headline.
I arrived in Mumbai three weeks after the terrorist attacks that killed 200 people—including, tragically, Yes Bank's co-founder Kapur, who had served as the company’s nonexecutive chairman and was gunned down while having dinner at the Oberoi hotel. (His wife and two dinner companions miraculously escaped).
My hope in traveling to Mumbai was to learn about the current state of Indian business in the wake of both the credit crisis and the attacks. But in my first few days in this grand, sprawling, chaotic city, what I mainly heard, especially talking to bankers, was about America, not India. How could we have brought so much trouble on ourselves, and the rest of the world, by acting in such an obviously foolhardy manner? Didn’t we understand that you can’t lend money to people who lack the means to pay it back? The questions were asked with a sense of bewilderment—and an occasional hint of scorn. Like most Americans, I didn’t have any good answers. It was a bubble, I would respond with a sheepish shrug, as if that were an adequate explanation. It isn’t, of course.