SBI chairman sceptical of international financial hub1 min read . Updated: 06 Feb 2015, 11:41 PM IST
SBI chairman Bhattacharya said that one of the prerequisites for a global financial centre is to have a fully convertible currency, which is not the case in India
Mumbai: State Bank of India (SBI) chairman Arundhati Bhattacharya is sceptical about the development of an international financial hub in India in the near term.
Speaking at a panel discussion at “Mumbai Next", an event supported by the Maharashtra state government and the central government, Bhattacharya said that one of the prerequisites for a global financial centre is to have a fully convertible currency, which is not the case in India.
“That won’t happen till the economy looks up and will have to be preceded by a good round of economic growth which will not happen before 7-10 years," she said.
The Reserve Bank of India (RBI) has remained cautious about moving towards the full convertibility of the rupee. Speaking at an event on 29 January, RBI deputy governor H.R. Khan had said that India is not ready for it.
“The pros and cons of full capital account openness is a contentious issue, and, in any case, we are not ready for it at this point of time," Khan said.
Bhattacharya said India should start building the necessary infrastructure for an international financial centre right away.
“I don’t see any reason to be limited by it (lack of full currency convertibility) because it is something that is set to happen. Meanwhile we need to create the infrastructure that other financial centres have created," she said.
The government in its union budget announcement on 28 February is expected to announce policies which will help in building an international financial centre in India. On 4 February, Business Standard reported that India’s first international finance centre will start operations in 2015-16 and will be apart of the announcements in the Budget.
Speaking on the corporate bond market, the SBI chairman said that the market remains illiquid due to the lack of long term funds participating in the corporate bond market.
“We are not getting sufficient number of players in the market. The long term funds like insurance, pension sectors need to be allowed to play in this market. They follow a very risk averse kind of program to invest in corporate bonds as of now. So you have to allow them to take more risks to be able to play in these markets," Bhattacharya said.