The Banking and Strategy Initiative

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This Bank subsidiarisation thing: It makes sense, right?

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A caveat for some of the global readers who may not want the Indian example for their purposes and game plays. I understand, I have a different India blog but it seems that the global examples of upcoming regulation are not as critical as the inventive bank policy in big opportunity India and my main theme below is to be Growing Foreign bank franchises in India thru adequate regulation.

UK’s Vickers commissions hits over the weekend showed up a cagey banking industry reeling from the super taxes and the UK economy looking for super regulation in the media. However, while Banks will now go on with their business and no one can stop us, unless governments do not intend to stay in power or in a habitable economy in the long run.

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The banks create the growth juice for the economy and inevitably can grow 2-3 times the GDP growth in any region consequently. This is without exceeding appropriate credit provisions and limits and even back stops from yore. Also like Basel 3 made it redundant for banks to count as capital monies from the overnight interbank markets in Capital and gave the big ones enough time to comply, the requirement that subsidiary business in retail, insurance, trading and prime broking / client trading maintain their own capital limits is also a fair provision let go when and only when the secular growth pointer was always on the up. Thus, it is reasonable to not expect any new regulation to allow different business units to borrow each other’s capital, in deed we have been doing so starting from the nineties with holding company limitations and more.

India’s regulations also will allow more business to growing INR 5-10 trillion business from foreign banks allowing them to grow in a free market ( we never had any restrictions on their trading and broking businesses either , except for appropriate documentation. Neither is Vickers expecting banks to create new mini banks nor is the over arching ambition of the European competition commission likely to

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influence future bank policy globally. However , that India will allow banks ( based on a current RBI treatise) to operate unlimited branches in India only that its business in India be adequately provided for nationally itself is likely to be the only sane option and followed in other parts of the world as and when the regulations get signed on the dotted line. India of course is as much a retail opportunity ( with foreign banks underlining quality of processes, service and presence that could be an example for domestic players) as corporate and thus the opportunity cost of creating a separatly run bank for india will indeed be just adding to the profit opportunity as we grow our retail consumption pie of the GDP from 30% to 50% in the next few years. As the India CEO of Standard Chartered will also confirm ( following TV ops in India) that India also offers excellent capitalisation opportunities for global giansts of 2030 and more. HSBC, Stan chart and Citibank are major players in the India business and the opportunity pie does not have to be created from zero for the Jamie Dimons and the Moynihans to follow


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