Modi makeover ignites India’s banking leaders
In exclusive interviews, leaders of Indian finance reveal how banks, nursing wounds from the recent credit boom, should be set free from the shackles of state control, as reformists raise hopes of a new dawn for Indian capitalism. A jolt, not a tweak, to the financial system is desperately needed.
No people whose word for ‘yesterday’ is the same as their word for ‘tomorrow’ can be said to have a firm grip on time,” the novelist Salman Rushdie once quipped, referring to his Indian heritage.
The maxim is particularly apt when it comes to the slow pace of financial reform: since the early 1990s, the Indian elite has deferred efforts to liberate the banking sector from the vice-like grip of state control and attacked crony capitalists that lay siege to public-sector banks.
In fact, India’s relative resilience to the 2008 global banking crisis gave the New Delhi establishment and bankers in Mumbai a false sense of control over the levers of the economy while, once again, postponing badly needed reforms to the financial industry.
Fast-forward to 2014 and the price of hubris has been exposed: Indian public-sector banks face a capital crunch without urgent redress; corporate leverage is at an all-time high, and a slew of reforms is needed to jump-start the next credit cycle as the battered economy stages an uptick.
Mumbai bankers are now hoping for audacity as a political earthquake has transformed the banking and capital-market outlook, bloodied for the past 18 months, with the spectacular victory of the reform-minded Bharatiya Janata Party, led by Narendra Modi, who assumed office at the end of May.