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MUMBAI : At a time when foreign banks are going slow in India, reevaluating growth prospects in certain segments, Germany’s Deutsche Bank wants to expand across all verticals it is present in. India is the only market outside Europe where the bank has a retail presence. In an interview with Mint, Alexander Von Zur Muehlen, its chief executive for the Asia Pacific, said why environmental, social, and corporate governance (ESG) is an opportunity and not just a necessity, which has to be handled differently in this part of the world. Edited excerpts:

How do you see the growth opportunity in India ?

India has performed beyond our expectations over the last couple of years. The services we provide within India are north of what we currently have at a group level. Deutsche Bank in Asia Pacific is also performing very well and has been providing higher return on equity than we do at the group level. Owing to the rising number of multinational corporations coming from this part of the world, cross-border banking services are required, whether it is from hedging or the financing standpoint, transaction banking will come into play. That is the bridge into Europe or intra-Asia or the Americas. The India franchise has been very good for us and we have high aspirations for years to come to be able grow it. We have more than 14,000 employees here and India is the only country in the world outside of Europe where we have a retail banking franchise. We also have a lot of group-wide service capabilities in the tech and operations space that we run out of India.

Do you plan to expand your operations here?

Prudent risk management is super-critical for any bank and I mention this because our risk provisioning has been very low over the years in India. Our activities, including the retail banking piece, have been very strong throughout. Thanks to prudent risk management we have safely navigated through challenging market environments. We do look at expansion across all units, including the affluent retail banking and private banking activities, as much as the corporate and investment banking space. We are looking at growth and have infused about $1 billion in capital in the last three years into the India unit, and we look forward to more opportunities to grow.

Are you cutting back on your Russia exposure?

We feel comfortable with the exposure we have directly and indirectly with regard to Russia as we have been reducing our exposure there over the last couple of years, significantly. The bank has been very focused on serving our multinational clients, including German household names, with respect to their activities in Russia. Consequently, our local exposure from credit and currency standpoint has been very muted.

What are your thoughts on ESG, especially in India?

We look at ESG not just as a necessity, but also as an opportunity. Financial markets across the globe are gearing towards this and the reality is that ESG considerations are becoming increasingly central to the licence to operate. In this part of the world, ESG requires a lot of transition work. There are requirements for new products, advice, and a different approach to financial markets. We want to deeply embed ourselves in this transformational journey with our clients. It is not helpful for a client, investor, or a bank to look at a black-and-white system to categorize an entity as ESG-compliant or not. We need to recognize that in emerging markets, the work that needs to be done towards the transition is bigger and more complex. We look at it in a very dedicated manner and for the region, we have dedicated ESG efforts. If you look at it superficially, in Europe, ESG is focused on the ‘E’ but it is more than that in this part of the world.

Do you think India will be able to become a manufacturing hub in the coming years?

India is also going to be a big beneficiary of supply chain migration as well as diversification. We have been seeing the world speaking about this a lot since the emergence of covid-19. We also recognize that so much has happened in certain industries and logistical hurdles had to be overcome. But if we look at the effect that the Russian war in Ukraine has had on the supply chains for several industries, it speaks out as much for migration as for having alternative locations. Of course, having these alternative capabilities will raise costs in many industries but you do need to have them. If you think about production-heavy activities, there are not many locations that can produce keeping in mind a certain quality and quantum at a certain speed. When you are looking for real absorbable capacities, there are not many markets, and India is one of them.

How does Deutsche adjust to the ever-changing regulatory landscape in this part of the world?

I do not think regulations are meant to make life easy for financial sector companies and it is part of our business to understand the changes. Let me give you a completely different angle on local regulations, not just for India but for Asian economies as a whole. The largest part of banking products, given the regulations, need to be done with full scrutiny and reliability not just on our side but also from the clients. Everybody can and everybody does banking products in the US and in Western Europe. Doing this in smaller and emerging markets where regulations change, sometimes on a daily basis, is almost an art. It does require you to really be on the ground. It is the unique selling proposition (USP) for banks to get that right, to really know the way.

 

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