COBCAM 2017: ECHO: Panel Discussion on “Is the creation of a bad bank beneficial to the banking sector? Can it replicate the advantages as seen in other countries?”

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Mr. Sandeep Hasurkar, Vice President, IL&FS Renewable Energy Ltd.

Mr. Sandeep complemented students for their spirit in banking. He said that there are two to three basic issues in the case of bad banks. He stated that shifting NPA from one balance sheet to another (called structuring) does not address the root problem. He believes the responsibility of recovering money should be on the lender. He elaborated that banking has been at the apex of Indian economy and has helped India on many accounts. He lamented the Indian tendency of depending on government and said that the moral hazard-breaking contract and shift this NPA problem to the government should be solved.

Further, he questioned the accountability of banks and bankers if this is allowed to happen. He believes that some degree should be borne by the banks. He said that banking has largely become a bureaucracy. So he concluded that bad banks only for shifting NPA’s off the balance sheet is a bad idea as it removes accountability from the banks.

Mr. Rajesh Parthasarathy, Managing Director, Growth Trust Ventures Consultancy Pvt. Ltd.

Mr. Rajesh started off by saying that there are various ways of managing a bad bank. He said we need to understand the issues inherent to the problem before tagging them as bad banks. There are different legal systems and kinds of industries, all of which could have different perspectives of viewing bad banks. Customization needs to be done regarding what is suited for each bank in India. Fundamental reasons behind the issue could be infrastructure, transmission losses, road traffic etc. which need to be deliberated carefully. In-depth solutions to core issues need to be done while analyzing the scenario.

Mr. Debashish Sarkar, Chief General Manager, State Bank of India

When Asset recovery companies (ARC) were not working so well, bad banks have come into existence. Many countries like China, Sweden have gone through a phase where ARCs did not work up to the mark.

Mr. Sarkar said that banks will feel free to do business if banking sector is revived. He also stated that many companies have bad balance sheets but have loans approved. Lots of decisions are taken for non-commercial reasons.

You should have the responsibility of what you do but unfortunately, in public sector, this has not been possible.  Banking is like driving a car in a single route but imagine if a truck comes in front you. If you keep on following the same route you may meet with an accident. If you create an environment where processes become more important than decision then decisions loose the value.

Apart from this, nowhere people have been involved in deciding the correctness of the record, but then also a man taking loan can be arrested for fraud. Imagine a situation where one loan which is bad is brought in a bad bank but can be recovered and another loan is brought which is totally unrecoverable. There are no ways to segregate these two types of loans

All these problems occur only because there is hardly anyone available with a project management mindset.

For example, a man has to make 30 km road connecting two states. 28 km is built but last 2 km was not completed due to government rules in the second state. This case, when applied to a bad bank cannot be resolved easily as there is no fault of person or bank. Thus it becomes a dead loan. A proper project management is what is required.

Indian Judicial Academy in Bhopal is the place where all the judicial officials go for training. None of the judges have slight ideas that how their decisions impact NPAs. If these things are taken into consideration, bad banks can do amazingly well.

Mr. Ritesh Kumar Agarwal, Founder & CEO, FonePaisa Payment Solutions Pvt. Ltd

Mr. Ritesh views bad banks in a positive light, arguing that bad banks can correct mistakes while normal banks are capable of only reporting them. He stated that operating in a bad bank would require a different mindset and the employees must behave as “Project Managers” rather than as “bankers”. However, he stands by the opinion that banks should take ownership for the decisions they make.

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COBCAM 2017: ECHO: Panel Discussion on “Has excessive regulation in the financial markets disrupted the risk and reward equation?”

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Mr. Supreeth Shankarghal, Hedge Fund Manager, Novo Investments

Mr. Shankaghal kept it simple by stating that regulation is necessary albeit many may not like it. He said that regulation is definitely needed but was unsure if it is excessive. According to him, the current regulation hasn’t been updated. He quoted that “Present regulation is like a speed-breaker, it should be like a speed-camera”.

Further, he elaborated that today taking excessive risk is taken for granted. He believes that there should be more stringent rules instead of large laws which people are unable to understand. He stated that regulation is required not only in capital markets but also in places where investors start investing money. He said that SEBI should work on reducing unnecessary paperwork. Regarding multiple regulators, he said that they are unavoidable but there should be a cooperation between the regulators.

He concluded that algorithmic trading and other advances have kept regulators somewhat incompetent to do proper regulation.

Mr. Nilanjan Das, Deputy Head Asset Management and Wealth Management, Deutsche Bank

Mr. Nilanjan Das expressed concern over the numerous complicated regulations on the market. He laid emphasis on protecting the investors and the customers regardless of the risk environment. He stated that the implementation of current regulations increases operational costs and that more research is needed in the development of a system to estimate risk and return. This will not only save the financial system from incurring unnecessary costs but will also help make the banking system more transparent. The development of such a system will also help price risk according to the customer’s terms.

Mr. Nilanjan Das stated that regulations are the way of life in the fiduciary financial industry. Since there is immense trust between the dealings of the industry and its customers, investors and other stakeholders, he believes regulations are of paramount importance. He also emphasized on the susceptibility of Indian banks to be liable to Federal Laws thanks to the importance of regulatory laws and citizen protection laid down by their financial system. He believes the major factors of regulation in play are the size of the regulation and the smartness with which we handle them.

Mr. Mahesh Chhabria, Vice President (New Projects), SBI Mutual Funds

Mr. Mahesh started the discussion by giving an overview of financial regulations. He said that financial regulations regulate financial stability. Further, these regulations should be optimum, neither too strict nor too lenient, given the state of various other factors involved.

According to him, the government is taking a stance towards outdated regulations and improvising them with several changes, which is adding more and more value to the system. Having said that, he cited that regulator should stand at the signal, not after the signal. Having worked at mutual fund investment, he provided some insights into the industry and its regulatory impacts. Mutual fund industry involves a high market risk, wherein the risk determines the reward. In such a scenario, the role of a regulator is to protect the interests of a retail investor. A regulator should be the advisory for the investor, looking into the risks and rewards associated with his investments. Also, long term investments should be supported by the regulator, taking calculated steps at each point.

Mr. Mahesh ended the discussion by quoting that these regulations are meant to make sure that you apply the break at the correct time.

Mr. Bharat Gupta, Vice-President, Northern Trust

Mr. Bharat Gupta began the discussion by quoting the fact that ever since the regulations have been put, Asset Quality Review has been started. He said, “We are at a point where regulations should be enablers”. These compliance regulations require lots of clean-ups and hence a balance between the time spent and these clean-ups is very important.

He continued the discussion by saying that there is no doubt that these regulations have improved the banking services but currently, it is being overdone.

Moving on, Mr. Gupta gave an example of Financial Analytics Companies. He said that there may be occasions that capital available is scarce; this may lead to charging higher than the consumer’s tolerance limit. Thus, a balance is required to be maintained so that business is not lost. For example, if a customer is a high risk to the firm, he should be handled accordingly. This will help firms in attaining competitive advantage.

 

COBCAM 2017 Inauguration Ceremony

The Inaugural Ceremony of COBCAM 2017 began with the ceremonial lighting of the lamp by the Director, Dr. Madhu Veera Raghavan, Admissions Chair, Professor Aditya Mohan Jadhav, BKFS Representative Mr. Dhanyakumar Malali and the Key Note Speaker of COBCAM 2017, Mr. Deepak Reddy, Group Head HR, Bajaj Finserv.

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Professor Aditya Mohan Jadhav emphasized the grounded industrial exposure the students of TAPMI get by the very structure of the curriculum. Dr. Madhu Veera Raghavan opened COBCAM 2017 by sharing his dream for TAPMI to be one of the top 10 Business Schools in India and for BKFS students to play an integral role in the financial services sector. He stressed on continuous revival and revamping of the curriculum to keep in constant touch with the changes in the industry.

The Key Speaker, Mr. Deepak Reddy refreshed on some of his fondest memories and biggest learnings as a TAPMI student. He urged the students to learn as much as possible in as many diverse sectors and fields. He noted the change in the perception of the consumers towards the banking industry and how that the most important factors that influence the success in the banking service sector are customer’s ease of obtaining information and customer fulfillment.

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He praised the change from the traditional banking practices to modern digitized methods which vastly reduced the processing speed. While this has greatly increased customer satisfaction, it has simultaneously reduced employment requirements; replacing man with machine. A case in point, he reminded the students that the financial sector is highly volatile with uncertainty around every turn.

On what he expects from students and future leaders, he demands that we find our purpose in life; a field where we can create an impact and lead change. He also stressed the importance of being socially aware and developing capabilities to collaborate with other individuals. He urged the students to work hard and learn continuously.

The insightful and informative speech set the tone for an evening of learning at COBCAM 2017.