India's banks are no better than the antiquated Ambassador and Fiat cars that used to trundle along India's roads, while "the rest of the world is using BMWs and Ferraris", a report commissioned by India's finance ministry into making Mumbai an international finance centre concluded last year.
Now that India's old-fashioned banking system has saved the country from the worst financial pileup the world has seen in decades, the case for more sophisticated financial machinery looks harder to make.
"Gradualism in reforms is really saving us from crisis to crisis," an executive at the Reserve Bank of India (RBI) said. "We have not made any reforms overnight, we have had a lot of discussions, lots of back and forth, before we make any steps.
"If the rupee was convertible then anything could have happened."
Gaurav Kapur, a senior economist at ABN Amro India, agrees. "The conservative pace of financial-sector reforms has certainly helped us to remain insulated from what's happening around us. A lot of these problems have been created by those very vehicles India has been criticised for not adopting."
Asian markets which have opened up more fully, such as China, South Korea and the Philippines, look more vulnerable.
Percy Mistry, who wrote the report on Mumbai as a financial centre, concedes that had India implemented the reforms he recommended, it would have been more severely hit.
"We would have been affected, there's no question about that," he said. "But do you sacrifice a two per cent to three per cent increment in gross domestic product (GDP) every year, simply to avoid a financial crisis every 10 years or so that might cost you five per cent of GDP?"
A century ago, the financial markets of Bombay and Calcutta were as advanced as any in the world. The original fortunes of many of today's business clans were based on trading in opium and cotton futures.
But when a controlled economy was instituted in 1950, the country fell behind until India started opening up its economy again in 1993. Since then, reform has proceeded at a snail's pace.
It took from 2003 to last year for the RBI to progress from the first to the second drafts of regulations allowing collateralised debt obligations (CDOs). Now, despite the urging of both Mr Mistry's committee and a follow-up report led by the former IMF chief economist Raghuram G Rajan, it looks like CDOs could be on the shelf for years to come.
This absence of debt instruments has arguably prevented Indian banks from getting into difficulties.
"The market for securitised paper is still very modest here," said Robin Roy at Standard Chartered Bank in Mumbai. "You don't have layers and layers of securitised paper with different tenors and seniority, so by default the exposures are controlled."
The RBI has also imposed limits on the type and quantity of securities that India's banks can buy abroad, preventing them from loading up on mortgage-backed securities.
ICICI Bank's joint managing director, Chanda Kochhar, said on Thursday that ICICI's total exposure to foreign markets was equal to about four per cent of its US$103 billion (Dh378n) balance sheet. ICICI's UK subsidiary held $81 million of senior bonds issued by Lehman Brothers. According to Vaibhav Agrawal, a banking analyst at Angel broking, two-thirds of the $1.5 billion in ICICI's overseas credit exposure relates to the corporate debt of its Indian clients.
The exposure of the state banks, which make up 70 per cent of the sector, is considerably lower. The State Bank of India chairman OP Bhatt said on Thursday that the lender had exposure to just $5 million of Lehmans bonds.
India has also avoided the credit bubbles seen in the US and Europe.
Mr Kapur said the RBI could take the credit for this. "RBI has been conservative, but they have been prudent in identifying and arresting the build-up of a credit bubble," he said.
In Dec 2006, the RBI took fright at the 30 per cent growth in bank lending seen in 2005 and 2006 and tightened controls on lenders.
India's major private banks - ICICI, HDFC and AXIS - are now all conservatively financed, with tier-one capital adequacy ratios of more than 10 per cent. By comparison, Barclays, of the UK, will have a capital ratio of only 5.7 per cent, even after raising $1.4 billion to fund its Lehmans deal. Lloyds-HBoS, after the merger, will have a core tier-one ratio of 5.9 per cent.
Mr Agrawal estimated the off-balance sheet exposures of India's big banks at between 40 per cent and 60 per cent, also lower than most European and US banks.
However, according to Mr Mistry, India's escape may paradoxically end up costing the country heavily if necessary reforms are brought to a grinding halt, just as India's escape from the Asian crisis in 1998 killed off the first wave of reforms started in 1993.
"Reforms were proceeding apace until 1998 when the Asian crisis derailed everything," he said. "It's entirely possible that the same may happen again, that people think 'we should go back into our holes and stay with what we've got'. I think that could cost two to three per cent of GDP growth if that happens."
Mr Mistry estimated that if India's financial services companies were able to provide a full and sophisticated range of financial services, it would create new business worth at least 1.5 per cent of Indian GDP, while a further 1.5 per cent would be generated by the greater ease with which Indian companies would be able to do business.
"As a committed Indian, I'm terribly worried that in this maelstrom, a whole bunch of arguments have been raised by academics, professionals and the public at large," he said. "Every anti-reformer, everyone who believes in state control, every leftist will be making hay with this for years to come.
"It's the same argument that because you have a bullock cart you shouldn't drive an automobile because you might kill people in a road accident."
business@thenational.ae
Anti-semitic attacks
The annual report by the Community Security Trust, which advises the Jewish community on security , warned on Thursday that anti-Semitic incidents in Britain had reached a record high.
It found there had been 2,255 anti-Semitic incidents reported in 2021, a rise of 34 per cent from the previous year.
The report detailed the convictions of a number of people for anti-Semitic crimes, including one man who was jailed for setting up a neo-Nazi group which had encouraged “the eradication of Jewish people” and another who had posted anti-Semitic homemade videos on social media.
The Sand Castle
Director: Matty Brown
Stars: Nadine Labaki, Ziad Bakri, Zain Al Rafeea, Riman Al Rafeea
Rating: 2.5/5
RESULT
Arsenal 1 Chelsea 2
Arsenal: Aubameyang (13')
Chelsea: Jorginho (83'), Abraham (87')
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Brief scores:
Toss: Northern Warriors, elected to field first
Bengal Tigers 130-1 (10 ov)
Roy 60 not out, Rutherford 47 not out
Northern Warriors 94-7 (10 ov)
Simmons 44; Yamin 4-4
Milestones on the road to union
1970
October 26: Bahrain withdraws from a proposal to create a federation of nine with the seven Trucial States and Qatar.
December: Ahmed Al Suwaidi visits New York to discuss potential UN membership.
1971
March 1: Alex Douglas Hume, Conservative foreign secretary confirms that Britain will leave the Gulf and “strongly supports” the creation of a Union of Arab Emirates.
July 12: Historic meeting at which Sheikh Zayed and Sheikh Rashid make a binding agreement to create what will become the UAE.
July 18: It is announced that the UAE will be formed from six emirates, with a proposed constitution signed. RAK is not yet part of the agreement.
August 6: The fifth anniversary of Sheikh Zayed becoming Ruler of Abu Dhabi, with official celebrations deferred until later in the year.
August 15: Bahrain becomes independent.
September 3: Qatar becomes independent.
November 23-25: Meeting with Sheikh Zayed and Sheikh Rashid and senior British officials to fix December 2 as date of creation of the UAE.
November 29: At 5.30pm Iranian forces seize the Greater and Lesser Tunbs by force.
November 30: Despite a power sharing agreement, Tehran takes full control of Abu Musa.
November 31: UK officials visit all six participating Emirates to formally end the Trucial States treaties
December 2: 11am, Dubai. New Supreme Council formally elects Sheikh Zayed as President. Treaty of Friendship signed with the UK. 11.30am. Flag raising ceremony at Union House and Al Manhal Palace in Abu Dhabi witnessed by Sheikh Khalifa, then Crown Prince of Abu Dhabi.
December 6: Arab League formally admits the UAE. The first British Ambassador presents his credentials to Sheikh Zayed.
December 9: UAE joins the United Nations.
The White Lotus: Season three
Creator: Mike White
Starring: Walton Goggins, Jason Isaacs, Natasha Rothwell
Rating: 4.5/5
What is an FTO Designation?
FTO designations impose immigration restrictions on members of the organisation simply by virtue of their membership and triggers a criminal prohibition on knowingly providing material support or resources to the designated organisation as well as asset freezes.
It is a crime for a person in the United States or subject to the jurisdiction of the United States to knowingly provide “material support or resources” to or receive military-type training from or on behalf of a designated FTO.
Representatives and members of a designated FTO, if they are aliens, are inadmissible to and, in certain circumstances removable from, the United States.
Except as authorised by the Secretary of the Treasury, any US financial institution that becomes aware that it has possession of or control over funds in which an FTO or its agent has an interest must retain possession of or control over the funds and report the funds to the Treasury Department.
Source: US Department of State
At a glance
Global events: Much of the UK’s economic woes were blamed on “increased global uncertainty”, which can be interpreted as the economic impact of the Ukraine war and the uncertainty over Donald Trump’s tariffs.
Growth forecasts: Cut for 2025 from 2 per cent to 1 per cent. The OBR watchdog also estimated inflation will average 3.2 per cent this year
Welfare: Universal credit health element cut by 50 per cent and frozen for new claimants, building on cuts to the disability and incapacity bill set out earlier this month
Spending cuts: Overall day-to day-spending across government cut by £6.1bn in 2029-30
Tax evasion: Steps to crack down on tax evasion to raise “£6.5bn per year” for the public purse
Defence: New high-tech weaponry, upgrading HM Naval Base in Portsmouth
Housing: Housebuilding to reach its highest in 40 years, with planning reforms helping generate an extra £3.4bn for public finances
ACC 2019: The winners in full
Best Actress Maha Alemi, Sofia
Best Actor Mohamed Dhrif, Weldi
Best Screenplay Meryem Benm’Barek, Sofia
Best Documentary Of Fathers and Sons by Talal Derki
Best Film Yomeddine by Abu Bakr Shawky
Best Director Nadine Labaki, Capernaum
Specs
Engine: Duel electric motors
Power: 659hp
Torque: 1075Nm
On sale: Available for pre-order now
Price: On request
NO OTHER LAND
Director: Basel Adra, Yuval Abraham, Rachel Szor, Hamdan Ballal
Stars: Basel Adra, Yuval Abraham
Rating: 3.5/5
The story in numbers
18
This is how many recognised sects Lebanon is home to, along with about four million citizens
450,000
More than this many Palestinian refugees are registered with UNRWA in Lebanon, with about 45 per cent of them living in the country’s 12 refugee camps
1.5 million
There are just under 1 million Syrian refugees registered with the UN, although the government puts the figure upwards of 1.5m
73
The percentage of stateless people in Lebanon, who are not of Palestinian origin, born to a Lebanese mother, according to a 2012-2013 study by human rights organisation Frontiers Ruwad Association
18,000
The number of marriages recorded between Lebanese women and foreigners between the years 1995 and 2008, according to a 2009 study backed by the UN Development Programme
77,400
The number of people believed to be affected by the current nationality law, according to the 2009 UN study
4,926
This is how many Lebanese-Palestinian households there were in Lebanon in 2016, according to a census by the Lebanese-Palestinian dialogue committee
COMPANY PROFILE
Name: Kumulus Water
Started: 2021
Founders: Iheb Triki and Mohamed Ali Abid
Based: Tunisia
Sector: Water technology
Number of staff: 22
Investment raised: $4 million
A cheaper choice
Vanuatu: $130,000
Why on earth pick Vanuatu? Easy. The South Pacific country has no income tax, wealth tax, capital gains or inheritance tax. And in 2015, when it was hit by Cyclone Pam, it signed an agreement with the EU that gave it some serious passport power.
Cost: A minimum investment of $130,000 for a family of up to four, plus $25,000 in fees.
Criteria: Applicants must have a minimum net worth of $250,000. The process take six to eight weeks, after which the investor must travel to Vanuatu or Hong Kong to take the oath of allegiance. Citizenship and passport are normally provided on the same day.
Benefits: No tax, no restrictions on dual citizenship, no requirement to visit or reside to retain a passport. Visa-free access to 129 countries.
FROM%20THE%20ASHES
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Company: Instabug
Founded: 2013
Based: Egypt, Cairo
Sector: IT
Employees: 100
Stage: Series A
Investors: Flat6Labs, Accel, Y Combinator and angel investors
ENGLAND SQUAD
Goalkeepers: Jack Butland, Jordan Pickford, Nick Pope
Defenders: John Stones, Harry Maguire, Phil Jones, Kyle Walker, Kieran Trippier, Gary Cahill, Ashley Young, Danny Rose, Trent Alexander-Arnold
Midfielders: Eric Dier, Jordan Henderson, Dele Alli, Jesse Lingard, Raheem Sterling, Ruben Loftus-Cheek, Fabian Delph
Forwards: Harry Kane, Jamie Vardy, Marcus Rashford, Danny Welbeck
In numbers
1,000 tonnes of waste collected daily:
- 800 tonnes converted into alternative fuel
- 150 tonnes to landfill
- 50 tonnes sold as scrap metal
800 tonnes of RDF replaces 500 tonnes of coal
Two conveyor lines treat more than 350,000 tonnes of waste per year
25 staff on site
The Details
Kabir Singh
Produced by: Cinestaan Studios, T-Series
Directed by: Sandeep Reddy Vanga
Starring: Shahid Kapoor, Kiara Advani, Suresh Oberoi, Soham Majumdar, Arjun Pahwa
Rating: 2.5/5
SEMI-FINAL
Monterrey 1
Funes Mori (14)
Liverpool 2
Keita (11), Firmino (90 1)
COMPANY PROFILE
Name: Lamsa
Founder: Badr Ward
Launched: 2014
Employees: 60
Based: Abu Dhabi
Sector: EdTech
Funding to date: $15 million