Coming out of the severe financial crisis gripping the globe, London has done well to hold on to its position as the world?s leading international finance centres. The European Cities Monitor Report 2009 from Cushman & Wakefield voted London number one city in Europe in terms of locating a business for the 20th year in a row. And one of the reasons for this success is the relentless travel and interaction that the Lord and Mayor of the City of London carries out. He spoke to Akash Joshi of FE and expressed his views on the Indian financial system. Excerpts:
On this trip to India, especially in the light of the global financial crisis, what are you observing about the space?
I have met with some very interesting companies, especially in and around Hyderabad, with current or future global ambitions and raise capital.
Although Indian banks were not impacted by the crisis, but the economy was. The 6% growth is good, however, it was built on significant government intervention. While speaking with companies we heard that they are now looking for significant expansion. While we will also be meeting with the finance minister, it would be interesting to see what the government?s ?exit strategy? would be. Most countries are looking how to move steadily and smoothly into a situation where recovery continues but based on real underlying activity instead of huge government support. India is no different in this respect.
What about the insurance sector and your meeting with the regulator?
Insurance is a big sector of interest for us and India. And we did meet up with the chairman of the Irda and he sounded very optimistic over the Insurance Bill being taken up by for discussion by December and then the reforms, of increasing the FDI limit, from 24% to 49%, be in place by February next year. This is an important step in liberalisation for India. Regulator also assured us that appropriate changes would be made to establish Lloyds here. With its unique structure does not sit into the existing structure. This will also help the Indian companies to take on more risk as they can re-insure it. And you know insurance is a great opportunity here. And there are the instances of mis-selling and it is that regulator is on top of things on that one. They are also working a lot on improving retention.
And what about your meet with Sebi? What were the areas of discussion?
Meeting Sebi was impressive. I quite like what chairman Bhave said, ?you could have a good syllabus, but if the teacher is not good, then the result is bad.? Similarly, what I would say is regulation sets the framework and we will see tightening of this globally. Regulations just sets the framework and the government has no business interfering. However as chairman said, only the syllabus would not work, we need good people to operate it. The institute for chartered accountants has several functions, setting of the standards, honing skills and education. But it does not regulate quality, we have an independent body. Interestingly, Sebi is thinking on the lines as well and they said it would be helpful to discuss it with the commerce ministry.
There were several issues about opening up the banking sector in India. What are your views on this ?
Basel-III is set to come out with new norms and on the capital adequacy. And, the interesting part of the process of creating a new structure for stability will make it easier to contemplate greater access for banks in India. Clearly, for Mumbai to become an international financial sector you require to have international banks and greater liberalisation.
What about the infrastructure scenario in India?
You have recently seen the bridge open in Mumbai and it has done marvellous things for the city. In India there will be pressure for funding the projects. Private financial investing (PFI) matches costs with revenues and this is a model that has worked in the UK. I think that PFI would have an important role and we have built a lot of expertise in advising the procurer in terms of structuring contracts.
