GST and bankruptcy code are big changes: Ajay Kanwal
New Delhi: Ajay Kanwal, chief executive, Asean and South Asia, at Standard Chartered Bank, is optimistic about the bank’s business prospects in India and plans to increase its investment and manpower in its local operations. Kanwal, who is in India as part of the Singapore business forum visiting the country along with Singapore Prime Minister Lee Hsien Loong, spoke about India’s investment climate, the ease of doing business and the impact of new tax measures like goods and services tax (GST) and general anti-avoidance rules (GAAR). Edited excerpts from an interview:
Are investors looking favourably at India?
There are external reasons and internal reasons that are working in India’s favour. The external reason is that one of the big destinations for most investments was China. That has tapered off. The alternatives emerging are Indonesia, India and Vietnam.
Internally, India has really changed the image. It seems like the best time to come in. It is a function of many things. Led by the PM, India has changed its image as a more engaging country. That makes a lot of change in perception and perception is reality. Second, the laws and regulations are changing. Third, the GDP (growing) at 7.5%. There is a push and a pull factor that is working in India’s favour.
Have things really changed on the ground besides the perception? Is it easier for businesses to operate in India?
India has moved up the ease of doing business index, but we are still low in the rankings. We have not reached the point where we are realizing our potential. Things are changing, but they are not enough. States are competing among themselves. Some regulations have eased out, but there are many regulations that people are getting more anxious about. For instance, in taxation, implementation of GST and GAAR, there is still a lot of need for clarity.
Instead of making ease of doing business in India our main objective, we should make ease of doing business in 10 cities in India the main aim. India is making progress. Is it fast enough? No. But is it strong enough? Yes. GST, bankruptcy code are not small tinkerings. They are big changes. The key will be implementation.
Has the bank achieved the rebalancing it was striving towards in its India operations?
We do believe India will grow. By the time the year ends, we would have added 1,000 people into our India business. These are typically in the consumer business and some of this in commercial business.
Our corporate bank in India was always large. Our corporate book has grown in the first half of the year.
Rebalancing will take time, but we have already begun the journey. It does not happen in a year; it’s a multi-year journey. We are investing in India.
The advantage we have is our network banking across geographies. We cannot be a large-scale local lender because we do not have the distribution to be one.
Does the lack of a distribution network hamper your plans of focusing more on retail?
Digital banking is a huge opportunity for any retail bank. This whole belief that we are restricted by distribution is still true, but less true. Our own belief is that why do we exist in retail in India is to make sure that we bring the best we do in the world to India. There are things we do very well and things we don’t do very well. Wealth management, for instance, is something we do very well, we have a decent card business and mortgage financing. We are not in car finance anymore because we don’t do that very well.
How much do you plan to invest in India?
We plan to invest $100 million in India over the next five years.
Have you managed to address the large concentrated corporate exposure at the bank?
There is $20 billion of risk weighted assets—those outside our risk tolerance level—that we planned to address over a period of time. That gave the rest of the bank clarity on the growth areas.
Having said that, has the world economic environment become much better than what it was a few years ago? I do not think so. Interest rates are still very low. There is volatility in the market and the commodity cycle is challenged. We have identified the issues and are addressing them. The corporate book will become more broad-based.
How does India’s tensions with Pakistan impact your plans?
Geopolitics being a factor of consideration for any business is real. Right now, it’s (tensions between India and Pakistan) very fresh. It has not changed our thinking (about India) as of now. And I am hoping that it doesn’t change our thinking as we go along. Right now, India is on a good growth path. It’s certainly a challenge that we have to think about—how India addresses it—and then we take it from there.