You were here 25 years ago and you are here now. what changed?
I think the country’s potential is much more tangible now – what’s being done with it is iAbility to roll out digital architectures in , vaccination and other areas. The potential of the country to realize and transform its scale is enormous. Ease of doing business has gotten better. This is a very unique point with respect to the pace and scale of development for India. There is always a strong talent pool here. This is extraordinary; talent ability. You can feel India’s superpower potential being realized instead of saying it. India is in a particularly good position.
Why do you think India is in a particularly good position?
Scale is really important on many different fronts….. India has a scale which is not there in many countries. Doing business in India has become easier – be it UPI or any other framework. So, having a backbone here is not something that a lot of different countries have. The government has done a remarkable job of being very visionary. It is very attractive. It gives people a lot of confidence (to build) on India as the base of centers of excellence for global operations of global capabilities. It also has the potential to reach a very large domestic market. Given the dynamics of China and geopolitics in particular, you don’t want to be too dependent on China. You need scale, quality and efficiency. India is one of the few markets in the world that can provide this.
How exactly does this go with Citibank’s strategy in India, especially after deciding to sell the retail business?
The main piece for the City was not retail. We are in the country for 120 years. India for City is something that has a huge impact on the history of our firm.
As a center of innovation and a center of talent, one of my mentors was Vikram Pandit. Some of my top leaders are from this country. Where we see the biggest opportunity for Citi and the role we can play for the country and the role that the country will play globally is around the institutional client base. It is more connected and simple in terms of business mix. There is no other global bank that has the depth and presence on the ground that we have.
The retail franchise’s association with the customers was…
The interesting pieces are the commercial banks. Don’t think of Citi as merely serving a local business with a lending offer. We serve companies that are digitally born that are often rapidly globalizing or that are part of larger global chains. We do their forex, trade finance, all their liquidity management, receivables and payables. The trading platform moves close to $4 trillion a day. There is no other bank close to it. We serve 40% of unicorns here in India. They desperately want to jump on us because we help them grow around the world. It is a huge engine of growth. City India is about how we connect the world to India and India to the world. How do we support the growth of Indian companies that need to tap global capital and bring capital to India? There are many clients who are joining the Middle Eastern Wealth Fund.
Most global banks conduct institutional business here. What is the city going to do differently?
City doubling is happening in India. We are investing heavily in our capabilities here at the grassroots. This is where the focus lies. We are crushing the competition on the institutional side. We are seeing double digit growth. The investment will be mainly on technology and talent. India will probably be our second largest market among 97 countries globally, after selling to the consumer business. We serve 30% of all MNCs operating in India. We serve 40% of unicorns and 8% of all trade flows in India go through us. And 5% of all domestic e-payments in India go through us. This is a very physical bank.
Central banks around the world are fighting inflation. There appears to be a gap between central banks in handling inflation and growth. What does this mean for the financial markets?
Different countries have different dynamics. They are positioned to function differently. In India, inflation is not as high as we are seeing in other countries. We are seeing the central bank taking action because of the foreign exchange impact. The dollar is going to be strong for some time, I suspect. We’re going to see Chairman (Jerome) Powell raise rates. Madame (Christine) Lagarde doesn’t have the same kind of freedom. What is happening in the market is a huge amount of volatility. It is likely to continue. We are starting to see quantitative tightening.
How is this constriction different from the previous one?
In the last decade, we had the ‘Fed Put’ trade. Now you’ve got a relatively systematic turnaround in the market. The taper tantrum in 2013 was pretty chaotic. This time, you have a strong macro. But it is the investors who are suffering and not the corporates. Rates are estimated in the market and we are at the beginning of QT. The impact on the markets will be challenging. In the US, we see that risk assets are decreasing. Qt is what the world is keeping a close eye on. The next six months are going to tell a lot.
Is this the right time to start Qt?
It is necessary. This is going to keep the volatility high in the markets. We at President Powell are in extremely capable hands. There is a lot of confidence, but that doesn’t mean it won’t be challenging. An asset allocation change is taking place.
Whenever there is central bank action and bubbles burst, a spill-over occurs. Many markets are in bear territory. what are its dangers?
Last quarter, (for) our entire corporate loan portfolio, we disclosed an actual loss of $18 million. I am not overly concerned about the credit quality. As a bank, you are constantly taking stress tests. Food security, energy security, Ukraine… recession, inflation… you’re sure you’re prepared for any imaginable scenario and testing resilience. Most companies have very high quality balance sheets. There are vulnerabilities in some emerging markets that we are seeing here in one of our neighbors. We can never account for the geopolitical hit. Look at India! India’s GDP is growing at the rate of 7-8%. It is poster-child in many ways. I’m not saying anything that feels like a real crisis on the corporate side. I think it’s harder for investors than for corporates.
One thing that was different in the last bull market was crypto. Many are shuttering, withholding withdrawals, filing for bankruptcy. How would that ripple through the system?
I don’t think it’s a huge spill-over because banks are not participating in crypto overall. The stand of RBI is very clear here. The technology beneath this…blockchain and others has the potential to be quite positive with the right regulatory railings and the framework around them.
We see how they can be helpful for advancements in digital architecture. The products require consumer protection. The same that exists in the banking system needs to be implemented in the crypto world. Until there is regulatory clarity around the world, major players in the financial system will (not) want to participate in terms of safety and security. I can quite appreciate why the RBI is concerned about this; I think the banking sector behaves responsibly. And so there is no spill-over. Look at the financial system; It’s on the trillions and the crypto isn’t that big.
What is the status of your Russian operations and asset sales?
Our operation in Russia is rapidly shrinking in size. We are supporting multinational clients, many of whom wish to exit Russia. We are exploring multiple possibilities around the exit of our consumer and commercial banking franchises. In terms of Ukraine, we are the only US bank operating in Ukraine. Our people have done an extraordinary job with the Ukrainian franchise. We support payroll, global and local supply chains, work with major NGOs, and work on Ukraine’s reconstruction plans.
Last year, your prediction of a “brutal winter” for the markets turned into a prediction. What Is It This Year?
Depends on where in the world you are. Europe can be a severe winter. I think India is in a very good position to move forward. There is a chance for India to lose. I have no doubt that it will be India’s game. All of us in America are going to keep an eye on whether this leads to a recession in the next year or two. The next few decades will belong to Asia. I see India as a superpower and at the forefront of it.