Letter to BS: A $5-trillion economy needs bolder financial leveraging

The discussion paper by the Reserve Bank of India (RBI) on improved governance of commercial banks, inter alia, puts a palpable stress on the tenure of bank CEOs. This is an old topic. Jamie Dimon is a titan in JPMorgan Chase, one of the largest US banks. He was popular with the Fed and the treasury department. And yet, post the 2008 Wall Street collapse, Dimon had to negotiate a $13 billion deal to settle investigations into mortgage bonds that JPMorgan Chase sold to investors. That is the price for taking legitimate risk in banking as a business. Dimon still runs the bank today with the same elan.

We have a CEO running the most prized private bank in India for the 25th year. Here banking was at its conservative best. It fitted well with the moderate ethos and climate of Indian business. Likely opting for a higher-risk quotient could have taken Indian banking per se, to the next level. The premise that it would be prudent to persist with a successful CEO despite his long perch is to deny newer possibilities either in the business per se or the style of running it.

What has triggered the thinking of RBI is the relentless and mounting non-performing assets and that has clearly influenced the conservative leaning in the paper. A $5-trillion economy needs far bolder financial leveraging and in support, astute and imaginative banking.

R Narayanan  Navi Mumbai

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