In an exclusive interview with FE on the sidelines of IISS-Citi India Global Forum, Rothschild - who is from a banking dynasty which is over two-and-a-half century old with interests in several sectors in many countriesalso noted that while American, Swiss and British banks have posted huge losses due to their sub prime exposure, Indian banks are on a "very stable footing" financially thanks to their conservative approach.
Though Hong Kong and Dubai have made rapid strides as an IFC, Rothschild - who as chairman and CEO of the international investment bank NM Rothschild and Sons Ltd for close to three decades during which he managed to increase the total assets of the business from 400m in 1976 to 4.6b in 2003 - said "I don't think India is late in trying to develop Mumbai as an IFC."
"We all have to be in Mumbai for financial reasons regarding investment and banking. But it is sad they (the authorities) have not done as much as they could have on improving the infrastructure," he said. Noting the improvements on the city's airport, Rothschild, however, said the authorities have to build flyovers and roads to improve traffic movement. "With the increase in traffic, they have to clear away a lot of the slum areas and improve the living quality and help the place to be a real IFC," he said.
Though the restrictive regulations in India have helped the country's banks to behave in a more balanced manner, he said "borrowing money and controlling investment is something that has to be educated for the people working in the business. Pointing to interesting times ahead for the banking sector, Rothschild said he expects public sector banks to become more realistic in their approach as the sector sees more mergers and acquisitions. While he was pleased with the growing presence of foreign banks in India, Rothschild stressed that the crucial issue is whether the government would "allow foreign banks to be more active or will they still control them."
Reiterating that infrastructure is a significant challenge for India, Rothschild said the government needed to change direction if they have to get foreign investment in the sector. "The question that is going to come up about India more and more is about movement of finance, which means that some of the restrictions will have to be relaxed further," he stressed.
Referring to UK-based private equity firm 3i recently raising over a billion dollars for an India Infrastructure Fund, Rothschild said raising funds is a challenge."I understand that FDI regulations (need to be strict) upto a point and one is very responsible for who invests in what. But (when it comes to raising funds for infrastructure) regulations in India are quite strict. It is unfair and they should be more relaxed. Some states are more advanced than the others as they are more open and have a higher literacy rate. It depends very much on the internal governments of each state."
Rothschild, who was also the chairman of influential The Economist Group, said at a time when the financial sector is going through a difficult period of readjustment, it is important to ensure greater transparency. "Management has to be more aware of shareholders interest. At the same time, one must look into some of these leveraged situations where money is freely used now," he said.