Developing India as an IFSC: Analysing the High Powered Expert Committee's Re...
Finmin report mumbai international fin center
1. Report of the High Powered Expert Committee on
Making Mumbai an International Financial Centre
2.
3. Report of the High Powered Expert Committee on
Making Mumbai an International Financial Centre
Ministry of Finance
Government of India
New Delhi
4. Report of the High Powered Expert Committee on
Making Mumbai an International Financial Centre
Ministry of Finance, Government of India, New Delhi
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5. The High Powered Expert Committee ( HPEC ) on
Making Mumbai an International Financial Centre
The Hon. P. Chidambaram th February
Minister of Finance, Ministry of Finance
Government of India, North Block
New Delhi
Dear Honourable Minister:
We submit herewith the ’s Report on Making Mumbai an International Financial Centre.
Our choice of the term ‘International’ instead of ‘Regional’ has been explained in our report.
Yours sincerely,
M. Balachandran O. P. Bhatt
C. B. Bhave Bharat Doshi
K. V. Kamath Nimesh Kampani
K. P. Krishnan (Convenor) Subodh Kumar
Ravi Narain Ms. Usha Narayanan
P. J. Nayak Aditya Puri
N. Mohan Raj T. T. Srinivasaraghavan
6.
7. Acknowledgements
HPEC would like to place on record its grateful thanks to Ajay Shah, Kshama Fernandes,
Saugata Bhattacharya, Ritu Anand, and S. Ravindranath who constituted the Research Team
that supported the Committee.
The also wishes to express its appreciation to Mr. M. Balachandran who put
the facilities of the Bank of India at the disposal of the Committee. The and the
Government of India would like to acknowledge their appreciation to the Bank of India for
meeting the administrative expenditure for the production of this report.
8.
9. Contents
Executive Summary xiii
. International Financial Services () and Centres (s) in Perspective, xiii.—. Implications
for India and Mumbai, xiv.—. The difference between and , xv.—. What are
International Financial Centres (s) and Services ()?, xvi.—. Growth and globalisation
drive India’s demand for , xviii.—. India’s competitive advantages in creating an , xix.—.
Financial regime governance: policy and regulation, xx.—. Reorienting the financial system
towards provision: A temporal roadmap for reform, xxiv.—. Urban infrastructure and
governance in Mumbai, xxviii.—. The choice, xxx.
. The Emergence of IFCs: A brief history
. Meeting cross-border trade, investment and other needs, .—. Evolution of international
financial services () and centres (s), .—. The first round of globalisation: circa –,
.—. An interregnum, the second round of globalisation (–), and beyond, .—. The
‘take-off ’ of second round globalisation after , .—. Classification of s, .—. Why did
Tokyo and Frankfurt not emerge as credible s?, .—. The Race to establish more s around
the world, .—. Implications for India and need for Mumbai to emerge as an , .
. st Century IFS provided by IFCs
. Fund Raising in s: What is involved? Who does it and how?, .—. Asset management and
global portfolio diversification, .—. Personal wealth management, .—. Global transfer
pricing, .—. Global tax management and cross-border tax optimization, .—. Global/regional
corporate treasury management, .—. Global and regional risk management and insurance/re-
insurance operations, .—. Global/Regional exchange trading of securities, commodities and
derivatives in financial instruments and indices in commodities, .—. Financial engineering and
architecture for large complex projects, .—. Cross-border mergers and acquisitions (M&A),
.—. Financing for public-private partnerships (), .
. Case studies: London, New York, Singapore, Dubai
. Summary overview, .—. A closer look at the City of London, .—. New York/Chicago as the
GFC for the Americas and the World, .—. Singapore as the /Asian GFC, .—. Dubai
as a RFC for the Middle East and South Asia, .
. Domestic and Offshore demand for International Financial Services (IFS) in India
. Implications of a large, rapidly growing home market for IFS, .—. India’s growing integration
with the world, .—. The impact of globalisation on demand and on s, .—.
Estimates for consumption by India, .—. Projections for consumption by India, .—.
Implications for India’s aspirations to create an in Mumbai, .—. customers outside
India as a market for an in Mumbai, .—. International comparisons, .
. Augmenting IFS provision via BPO
. How does an produce ?, .—. An outsourcing approach to provision and
IFC development: Possibilities, opportunities and pitfalls, .—. A opportunity: Asset
management in Mumbai based on algorithmic trading, .—. IFS subcomponents amenable
to outsourcing, .—. Making progress along two paths: Evolution and , .—.
Conclusion, .
. Market deficiencies in Mumbai that inhibit the provision of IFS
. The context in which Mumbai must develop and evolve as an , .—. Inadequate currency
and bond markets ( Nexus), .—. Missing currency & derivatives markets: An illustration,
.—. The market weakness of institutional investors, .—. A cross-country comparison, .
10. x R M I F C
. The macroeconomic fallout of an IFC
. Introduction, .—. Implications for fiscal policy & deficit reduction, .—. Financing public
debt differently, .—. The mutuality of interests in modernising debt management and having
an , .—. Implications for monetary policy, .—. Outlook for the current account deficit,
.—. Macro-stability for an , .—. The incompatibility of capital controls in a st century
, .—. Full capital convertibility and an in Mumbai, .
. Financial Regime Governance: Its role in an IFC and a comparative perspective
. The intrinsic value of regulation for production, .—. Three levels of international
competition on regulation and law, .—. Where does India stand? An illustrative bird’s eye
view, .—. The overall legal regime governing finance, .—. Summary of cross-country
comparisons, .
. What are the limitations of financial regime governance?
. Where do we stand? An – Market × Players matrix, .—. A pragmatic view of key areas
for progress, .—. Lessons from applying competition policy in the real economy, .—.
Artificial segmentation of the financial services industry, .—. Barriers to financial innovation,
.
. Why does financial regime governance have these limitations?
. Why is the pace of financial innovation slow?, .—. Proximate underlying reasons that are not
as transparent, .—. Deeper sources of dysfunction, .—. What impedes Mumbai from
becoming an ? A summary, .
. Reforming financial regime governance
. A shift toward principles-based regulation, .—. Reducing the artificial segmentation of
financial firms, products, services and markets, .—. Creating an environment conducive to exit,
.—. Retail vs. wholesale markets, .—. The role of exchange-traded vs. OTC derivatives in
the BCD nexus, .—. Regulatory impact assessments, .—. Strengthening the legal system
supporting an , .
. Tax policy for an IFC in Mumbai
. Does India need an IFC or a Tax Haven?, .—. Tax policy for Mumbai as an : and, by
implication, for India, .—. A modern income tax, .—. Taxation of financial transactions,
.—. A Goods and Services Tax (GST) in Finance, .—. Mumbai as an IFC: Tax Implications
for Maharashtra and Mumbai, .—. Interfacing tax policy and administration with the financial
industry, .—. Stability of tax policy, .—. Where India Stands on taxes: An international
comparison, .
. A perspective on Mumbai’s strengths
. Human capital needs for , .—. Democracy, Rule-of-Law and the Legal System, .
. Urban infrastructure and governance
. The importance of high quality urban infrastructure for an IFC, .—. Problems of cost,
.—. Cross-country comparison, .—. Difficulties in Mumbai from an perspective,
.—. Improving urban governance in Mumbai, .
. The HPEC’s recommendations
. The general macroeconomic environment, .—. Further Financial System Liberalisation and
Reform, .—. The challenge of urban infrastructure and governance in Mumbai, .
Selected Bibliography
A. The Committee
B. Comparing existing IFCs against Mumbai
11. Contents xi
C. Comparing emerging IFCs against Mumbai
D. Chronology of events associated with the effort by Benchmark Asset Management
Company (BAMC) to start an Exchange Traded Fund (ETF) on Gold
E. Activities of various financial firms in the areas of operation at an IFC: Wall chart
. Fund raising, .—. Asset management, .—. Personal wealth management, .—. Global
tax management, .—. Risk management, .—. Financial markets, .—. Securities
markets, .—. Mergers and aquisitions, .—. Leasing and Structured finance, .—.
Project financing, .—. Financing, .—. Insurance and reinsurance, .
F. Abbreviations
12.
13. Executive Summary
1. International Financial across borders: i.e. they are international
Services (IFS) and Centres financial services ( ). A cross-border
market for has existed over millennia.
(IFCs) in Perspective But it has been transformed in the th and
Historically, finance has always been th centuries and grown quite differently
‘international’ in character; capital has rarely and more dramatically since . It has also
been immobile. Money has moved freely become extremely competitive, with buyers
across borders for all of civilisation with gold and sellers around the world now having a
and silver (in various weights and measures) choice of procuring from competing
being global currencies for millennia. But, international financial centres (s).
the freedom of capital was dramatically A concrete example of procuring
curtailed during the ‘Bretton Woods’ regime, from an would be the raising of
created in , when capital controls were debt. If Mumbai became an , a
imposed on war-ravaged, capital-starved South African railway project could issue
economies. With post-war recovery, that a bond there in the primary market. It
regime broke down in . World finance would wish to do so because of Mumbai’s
has since been reverting to its natural state sophisticated securities markets, along with
with the removal of capital controls and the a number of asset managers in Mumbai
gradual re-integration of national capital running global portfolios. If the bond
and banking markets; but this time on a market was developed, the South African
global scale. bond issue could be denominated.
countries opened their capital Global investors would buy these bonds
accounts between and . A number and trade them on the secondary market
of emerging markets did so in the s in Mumbai. Each of these three steps –
– often at the ’s urging. In , primary market bond issuance by the South
the contemplated making an open African entity, primary bond purchases by
capital account a condition of membership. global and Indian investors, and secondary
But the idea was shelved when the Asian bond market trading by global players –
financial crisis erupted in . That was would generate revenues from the export of
precisely when India first contemplated re- financial services from Mumbai. Creating
opening its capital account. A series of an in India requires that Mumbai must
similar mini-crises occurred elsewhere in be viewed as competitive in the eyes of the
engulfing Russia and Latin America. By South African railway and in the eyes of
global bond investors, when compared with
all these crises were contained. Capital
alternatives like Singapore or London.
account opening resumed but with reduced
The global market in the st
momentum as the and others began
century is one in which competition is driven
to reconsider its benefits and costs. The
by rapid innovation in financial products,
question of capital account convertibility
services, instruments, structures, and
now weighs heavily on China and India,
arrangements to accommodate and manage
where financial systems with structural
myriad requirements, risks, and a ceaseless
weaknesses, legacy constraints and varying
quest for cost reduction. Competitive
degrees of State domination now confront
advantage in provision depends on
the irresistible forces of globalisation.
seven key factors:
Even with an open capital account,
some financial services (e.g. deposit . An extensive national, regional, global
banking) remain local and non-tradable. network of corporate and government
But most financial services are now tradable (supranational, sovereign, sub-sovereign
14. xiv R M I F C
and local) client connections possessed involving complex judgment and intellectu-
by financial firms participating in an alisation continue to be clustered at a few
international financial centre (). physical locations, where key individuals
. High level human capital specialised in meet face-to-face. This is characteristic of
finance, particularly quantitative finance, R&D in computer technology – clustered in
supported by a numerate labour force Silicon Valley and the Cambridge Corridor
providing lower level paraprofessional – despite extensive use of email, voice tele-
accounting, book-keeping, compliance phony and video conferencing. India has
and other skills. achieved a minor miracle with the explo-
sion of export revenues from services;
. World-class telecommunications infras-
tructure with connectivity around the yet, these revenues are a fraction of Silicon
clock, and around the world. Valley’s. Similarly, routine production of
financial services takes place everywhere.
. State-of-the-art systems, capability But, the most important and high value
to help develop, maintain and manage decision-making functions are concentrated
the highly sophisticated and expensive in a handful of s that have effectively
infrastructure of global financial (and consequently) become global cities
firms, trading platforms and regulators; At present, London, New York and
systems that are evolving continuously Singapore are the only global financial
to help firms retain their competitive
centres ( s). Many emerging s
edge.
around the world are aspiring to play a global
. A well-developed, sophisticated, open role in the years to come: e.g. Shanghai
financial system characterised by: (i) and Dubai. Other s in Europe and
a complete array of proficient, liquid Asia, like Paris, Frankfurt or Tokyo, connect
markets in all segments, i.e. equities, their financial systems to the world. But
bonds, commodities, currencies and they have lost market share and importance
derivatives; (ii) extensive participation in competing for global for reasons
by financial firms from around the explained in the report. The world market
world, (iii) full integration of market for is represented mainly by the ,
segments, i.e. an absence of artificially and Asia which together account for over
compartmentalised, isolated financial % of global . Correspondingly the
markets that are barred from having global market is concentrated in the
operational linkages with one another; three s located in each of these regions.
and (iv) absence of protectionist barriers
and discriminatory policies favouring
domestic over foreign financial firms in
2. Implications for India and
providing financial services. Mumbai
. A system of financial regime governance Given that an in Mumbai must be
(i.e. embracing legislation, policies, rooted in (and serve) India’s financial system,
rules, regulations, regulatory agencies rather than be an artificial offshore appendix,
etc.) that is amenable to operating on the call for creating an in Mumbai at
global ‘best-practice’ lines and standards; this time is implicitly a metaphor for (and
and finally synonymous with) deregulating, liberalizing
. A ‘hinterland advantage’ in terms of and globalising, all parts of the Indian
either a national or regional economy financial system at a much faster rate than
(preferably both) whose growth is is presently the case. Raising the issue of
generating rapid growth in demand for an in Mumbai now suggests that the
. pressing need for a new, more intensive
phase of deregulation and liberalization of
Advances in information and commu- the financial system has been anticipated
nications technologies ( ) have eased by India’s policy-makers and regulators
interactions over a distance and reduced
their cost dramatically. However, activities To understand what such a city is see Sassen ().
15. Executive Summary xv
and that the is a device to accelerate gap in capabilities that now exists between
movement in that direction. An will Mumbai and established s.
not be created quickly in Mumbai, nor will
it succeed, if action on further deregulation 3. The difference between BPO
and liberalisation is not taken in real time.
and IFS
In sustaining its trajectory as an
emerging, globally significant, continental The production of financial services
economy, the believes that India has worldwide is now fragmented into a series
no choice but to: (a) become a producer of interrelated sub-processes undertaken
and exporter of ; and (b) capture an separately. Business process outsourcing
increasing share of the rapidly growing ( ) of individual processes occurs at
global market. To achieve these a considerable distance from the point
two goals, its financial centre in Mumbai of customer contact where their eventual
must compete to become a successful resynthesis occurs. India is now a highly
. Incremental growth in the global successful venue for the global financial
market is now being driven by the services industry. In the last five years, it has
growing demands of China, India and gone beyond simple towards complex
A. With its strengths in human capital, knowledge process outsourcing or . This
a globally powerful services industry, and is a positive development for India to realise
its own hinterland, India has many natural its ambitions of creating an in Mumbai.
advantages for competing successfully in this Finance-related / builds up skills
market. In evolving as an , Mumbai will in India and increases the ‘mind-share’ of
probably grow in two distinct phases: India amongst global finance professionals.
However, there is a substantial differ-
. In the first phase (–) Mumbai ence between / and providing
must connect India’s financial system via an . Financial processes that get out-
with the world’s financial markets sourced under involve low-value, low-
through . That is what s like skill tasks. They are codified in a manual that
Frankfurt, Paris, Sydney, Tokyo and a indicates how tasks are to be performed, con-
host of smaller s do now in respect trols quality/integrity, and measures whether
of their national economies. they are being done correctly. Once the pro-
. In its second phase (–) Mumbai tocols are in place, the task is performed
must develop the capacity to compete repetitively. But some outsourced activities
with the three established s for in finance, involving research and analy-
global business that goes beyond sis, are moving up the value chain.
meeting India’s needs. After , For example, company financial analysis,
would hope that Mumbai would hold its credit research, and stock market research
own in competing with the other s functions are now also being outsourced.
and acquire increasing global market Still, the real value in financial services
share. provision remains concentrated in a small
number of jobs performed by qualified,
India’s financial services industry will super-numerate, imaginative people with
not become export-orientated, nor derive the specialised expertise, experience, domain
significant export-revenues, if Mumbai knowledge and skill-sets to be innovative
fails to become an . That will in designing financial instruments and
compromise not just export earnings from structures. Such people have extensive cross-
, but the quality, efficiency and range of border networks of clients and colleagues.
domestic financial services offered in India Their work involves fine judgment in
as well. For Mumbai to become an , making decisions covering a vast array of
India’s policy-makers and financial operators circumstances. It cannot be scripted in
need to understand fully the nature of and a manual codifying its mechanics. Such
opportunities in: the global market; judgments rely on intensive interaction,
the activities undertaken in s; and the inter-personal information flows, and
16. xvi R M I F C
complex negotiations among a number We categorise s in this report in four
of highly qualified professionals including ways; i.e. as:
financial experts, specialised corporate
Global (GFCs ) These are centres that gen-
lawyers, accountants, tax experts, etc. Such
uinely serve clients from all over the
interaction takes place at an .
world in the provision of the widest
From an Indian perspective, further
possible array of ;
progress with expanding the /
chain in financial services (horizontally and Regional (RFCs) They serve their regional
vertically) is inevitable and positive. But that rather than their national economies
should not be confused with what is required (see below) – examples of such s
would be Dubai or Hong Kong ;
to provide the full array of via an .
Intuitively, moving up from / to a Non-global and non-regional, ordinary inter-
fully fledged is analogous to moving up national IFCs These are centres like
from low-end programming to replicating Paris, Frankfurt, Tokyo and Sydney
Silicon Valley. Incremental progress in the that provide a wide range of but
Indian industry will not bring Silicon cater mainly to the needs of their na-
Valley to India; that requires a quantum tional economies rather than their
leap. Similarly, doing more / regions or the world – one might be
for the global financial services industry tempted to call them national s al-
will not, as a matter of course, result in though that term is an awkward one
because its two defining adjectives are
India automatically graduating to providing
contradictory; and
through natural evolution. /
will be done by specialised sub-contractors Offshore (OFCs) These are centres that are
with different skill sets and competencies. primarily tax havens for wealth man-
can only be provided by qualified agement and global tax management
and internationally known financial firms; rather than providing the fully array
which is what Indian financial firms must of .
quickly strive to become. India’s growth in The products and services that
/ is about doing more through s provide include the following eleven
services firms (like Infosys, Satyam, Wipro activities. s provide all of them. Other
or ). India’s growth in is about s provide some combination of them.
exporting through established and new
financial intermediaries. a. Fund Raising: for individuals, corpo-
rations and governments (sovereign
and sub-sovereign). This includes debt
4. What are International and quasi-debt across maturity/currency
Financial Centres (IFCs) and
Singapore and London are also regional in the
Services (IFS)?
sense that they serve Asean and the while New York
Financial centres that cater to customers serves North and Latin America. But because these
three centres serve the global economy, well beyond
outside their own jurisdiction are referred to meeting the needs of their respective regions, we
as international ( s) or regional ( s) classify them as global rather than regional. In that
or offshore ( s). These three different sense, the sees limited potential for Mumbai
adjectives are often (but wrongly) used to be a regional financial centre for South Asia given
current geopolitical realities. South Asia is more likely
synonymously in the literature. Yet these to be served by Singapore and Dubai for the time being.
three types of s are difficult to define We see Mumbai being an that serves India in the
in a clear-cut, mutually exclusive fashion; first stage and leapfrogs to serving the global economy
in its next stage of evolution. Ironically, Mumbai as an
although they are quite distinct. All these is likely to serve its region after it serves the world,
centres are ‘international’ in the sense that rather than before. For that reason, although the
they deal with the flow of finance and was asked to look into Mumbai becoming a regional
financial centre we dispensed with that characterisation
financial products/services across borders.
early on in the knowledge that it would be misleading.
But that description does not differentiate Throughout this report therefore we refer to Mumbai
them sufficiently in terms of their scope. becoming an international rather than a regional FC.
17. Executive Summary xvii
spectra; equity and quasi-equity for pri- will become increasingly important to
vate, public and public-private corpora- Indian firms as they evolve into s.
tions; as well as risk-management appen- f. Global/Regional Corporate Treasury
dices attached to primary fund-raising Management Operations: involves
transactions to ensure that the risk expo- fund raising, liquidity investment and
sure of the primary borrower or fund- management, asset-liability and dura-
raising entity (to currency, interest rate, tion matching, and risk-management
credit, market, operational and political through insurance and traded deriva-
risks) does not exceed tolerable limits. tive products for currency, interest-rate,
b. Asset Management and Global Port- credit and political risk exposure.
folio Diversification: undertaken by a g. Global/Regional Risk Management Op-
variety of national, regional and global erations and Insurance/Re-insurance:
asset managers including, inter alia pen- which involves highly developed ex-
sion funds, insurance companies, in- change traded and tailored derivatives
vestment and mutual funds of various (futures, options, swaps, swaptions, caps
types characterised by nature of instru- and collars) as well as world class deriva-
ment (i.e. debt, equity or convertibles), tives exchanges that trade a variety of
geography, or sector of activity. global contracts.
c. Personal Wealth Management (PWM): h. Global/Regional Exchange Trading of
for high-net worth individuals (s). Financial Securities, Commodities and
This activity is estimated to involve the Derivatives Contracts in Financial In-
management of personal assets of $– struments/Indices and in Commodi-
trillion worldwide. Overseas Indians ties: There is an increasing tendency to-
are estimated to hold financial wealth ward multiple listings of financial securi-
(i.e. apart from real estate, gold, art, ties (equities and debt), and of derivative
etc.) of over $ billion and total and commodity contracts, on different
wealth of over $ trillion. PWM takes exchanges with emerging investor de-
place in established s, but is more mand for x x trading of all listed
skewed towards specialised -s securities across all exchanges. Demand
in the Channel Islands, Switzerland, is highest for the securities of index-
Luxembourg, Monaco and Lichtenstein corporations in each major capital mar-
for the and Africa; Caribbean ket. It will gradually cascade downwards
offshore centres for the and Latin to cover global trading of all listed se-
America; Bahrain and Dubai for the curities in all markets – developed and
Middle East; Singapore, Hong Kong and emerging. Mumbai is better placed than
some Pacific Island offshore centres for most s to meet this demand, because
East/North Asia. of its human capital and capability,
d. Global Transfer Pricing: This is an as well as its world-class exchanges and
activity that o, like most governments, improving exchange regulation.
looks askance at, but needs to realise i. Financial Engineering and Architec-
and accept the reality of, in a global ture for Large Complex Projects: This
economy dominated by transnational primarily involves energy and infras-
corporations. This will become tructure projects requiring funds from
increasingly important to Indian firms a variety of global sources (public and
as they evolve into multinationals. private) with attached risk-management.
e. Global Tax Management and Cross- Again, Indian financial institutions and
border Tax Liability Optimisation: former FIs have well-honed skills in this
which provides a business opportunity particular arena.
for financial intermediaries as well as j. Global/Regional Mergers and Acquisi-
accountants and law firms until national tions Activity: This will become increas-
tax regimes begin to converge toward ingly important in India and for which
a global low tax norm. This activity a considerable amount of back-office
18. xviii R M I F C
/ and due diligence research limits set by RBI. The ability of Indian
work is already being outsourced to In- households to move resources across the
dia. border has increased with India’s increasing
k. Financing for Global/Regional Public- openness. The proliferation of Indian s
Private Partnerships: This relatively operating around the world – and transfer
new activity has emerged on scene with pricing with their subsidiaries abroad –
considerable force since the development has led to demand for fund-raising,
of the London Underground PPP. It has corporate treasury management and global
particular and immediate relevance for tax management. With rapidly increasing
the financing and rapid development of annual flows, the stock of assets outside the
Indian infrastructure without recourse country controlled by Indian households
to the treasury. and firms is rising rapidly. These assets
require for wealth, asset and global
5. Growth and globalisation tax management. All these phenomena
imply inevitable increases in purchases
drive India’s demand for IFS associated with the growing size of cross-
Since , India has grown rapidly and its border flows. Calculations in this report
economy has globalised. As India grows, suggest that on average, the revenue
it globalises faster. That happens through stream works out to % of the gross flows
the increased share of trade and foreign across the boundary.
investment in economic activity. Evidence of This translates to about $ billion of
that lies in two-way cross-border flows. Such IFS purchases by Indian clients in .
flows, on the current and capital accounts Looking ahead, India’s engagement with
combined, rose from $ billion in the world will intensify in three ways: (a)
(<% of ) to $ billion in reduction in barriers such as customs duties
(>% of ). The forces that resulted in and capital controls; (b) improvements in
this six-fold increase are intensifying and will infrastructure; and (c) greater participation
further accelerate growth of cross-border by s (Indian and foreign) in the Indian
flows. The next decade is likely to see cross- economy. These developments will induce
border flows growing as fast. deeper globalisation of the Indian economy
Current and capital account flows in- in the coming decade, inducing an upsurge
variably necessitate purchases of . For of purchases.
example, current account transactions in- Our estimates suggest that IFS pur-
volve payment services, credit enhancement, chases by Indian households and firms will
currency risk management, etc. Capital ac- rise to $ billion by on the basis of
count flows involve purchase of investment conservative assumptions in a ‘base-case’
banking, legal, accounting, risk manage- scenario. Under more propitious circum-
ment, research and other similar services. stances (e.g. if GDP growth is sustained at
When / enters or exits India, fees %) that figure could be over US$ billion.
are paid to various providers (e.g. com- By that amount could exceed US$
mercial and investment banks, securities billion in nominal terms.
brokerages, exchanges, insurance compa- These estimates warrant a different way
nies, asset managers, etc.). As India engages of thinking about exports and about
more with the world, the stock of assets held an in Mumbai. Traditional conceptu-
in India by foreigners rises. Similarly, the alising by Indian exporters about market
stock of foreign assets held by Indian house- opportunities typically assumes tapping into
holds and firms also rises. Purchases of risk a quasi-infinite world market. Financial ser-
management services grow in proportion
to these stocks which are far larger than the This was the approach taken by the Indian software
capital flows of any one year. industry which now has domestic sales of a mere $
million while its exports are a -fold multiple of
It is estimated that Indian households roughly $ billion a year. The search for growth on
have accumulated considerable wealth the part of firms like , Infosys or Wipro has been
outside the country; well beyond the present primarily about finding international customers. The
19. Executive Summary xix
vices are like software services in that they are exists for Indian financial genius to achieve
labour, skill, /communications intensive. similar export success in world markets;
But, in terms of market opportunity, there is but with one key difference. India’s own
a fundamental difference between finance growth and globalisation, and consequent
and software. It lies in India’s hinterland domestic demand for , generates natural
advantage. Rapid growth, even more rapid opportunities for producers in India
integration with the rest of the world, and (local and foreign) to acquire skills and
the high consequent growth rate of two-way exploit economies of scale. Indian software
cross-border financial flows now being seen, exports required an enabling framework
all serve to make India a large and growing from the State in the form of telecom
customer for . Unlike service exports, reforms. Indian exports will require
India provides a platform for nurturing a similar enabling framework from the
capabilities that can ‘go global’ instantly. State. Deeper and wider reforms and
Against that growing demand for , a improvements are needed in: (a) India’s
failure to respond on the supply-side, (i.e. financial system and the way it is governed
by creating a successful in Mumbai) and regulated; as well as (b) Mumbai’s urban
will simply oblige Indian customers to infrastructure and political/administrative
do increasing business abroad. That governance on a scale not yet envisaged.
will fuel the growth of Singapore, Dubai,
London and other s while depriving 6. India’s competitive
Mumbai of capturing opportunities for high advantages in creating an
value-added exports. For example, IFC
the Tata Steel-Corus deal generated
revenues in Singapore and London. Some Hinterland Advantage: As argued above
elements of such transactions do not appear the growth of the Indian economy
in Indian BOP accounts. Financial firms and and more rapid growth of cross-
policy makers in the three s and border financial flows have created
are highly attuned to the opportunities substantial local demand for . This
for selling into India. They have ‘driver’ supports the development of
embarked on strategies that exploit the skills, and generates economies of
current infirmities of the Indian financial scale on the part of financial firms
system. The most capable Indian financial operating in Mumbai. China has the
firms are likely to move to these centres in same hinterland advantage. New York
order to acquire the flexibility to provide has the North American economy as
their extant client base with the they its hinterland. London has the even
need, rather than risk losing their clients to larger economy, as well as its own
global financial firms. national economy, to serve. Singapore
Rapidly growing demand for in has a limited national economy. But
it is the financial epicentre of an
India provides an opportunity for its
A regional economy that is
financial services industry that its software
almost as large as China and larger
industry never had. Indian software exports
than India. Dubai does not have
were generated by ingenious Indian human
that kind of national or regional
capital exploiting foreign markets and
economy. But it is located in a region
requiring nothing from the State other
that is generating enormous financial
than telecom reforms. Indian genius
surpluses for investment abroad.
conquered world markets between and
Human Capital: India has four strengths
in a way that was not imagined in even by way of human capital endowments
the most optimistic forecasts of . In that give it a competitive edge over
the case of , an identical opportunity Shanghai, Singapore and Dubai:
• The extensive use of English,
domestic market does not loom large to the s of
these firms, and played no role in their graduating into which is the lingua franca of
export-oriented MNCs. international finance
20. xx R M I F C
• Generations of experience with upholding liberal values, protecting
entrepreneurship, speculation, property rights and maintaining
trading in securities and deriva- political stability. It fares well
tives, risk taking, and accounting. compared with China, Singapore or
Indeed the ability to provide Dubai but does not match London or
seems to be genetically coded into New York.
Indian finance professionals Mindshare: High growth, the
• Strong skills in information tech- / phenomenon, and the
nology and quantitative thinking success of Indians in global finance
all over the world, ensure that India
• Individuals of Indian origin play
has significant ‘mindshare’ at policy-
a prominent role in the top
making levels in global financial firms.
global financial firms. They are
India has an edge over Singapore and
well-positioned to intermediate
Dubai, and perhaps even over China,
between the business strategies of
in this respect.
these vital firms and the genuine
strengths and weaknesses of India Strong securities markets and advanced trad-
as an . ing platforms: India has the foun-
dations for providing global by
Location: Mumbai is well located in being virtue of its dynamic, technologically
able to interact with all of Asia capable securities trading platforms
and Europe through the trading day. in the and . These are the
Apart from the Americas, transactions rd and th biggest exchanges in the
with most of world can occur world measured by number of trans-
in daylight. Given the remarkable actions. India has an edge over China
and growing role of London in and Dubai, but not over Singapore, in
providing global today, India has this respect.
the advantage of having a – hour
overlap with London time. There is Taking these formidable advantages into
no operating within an hour’s account, the initial conditions supporting
variation of the Indian Standard Time India’s entry into the global market for
zone. India has an edge over Shanghai, are promising; especially when compared
but not over Dubai, in this respect. with the early days of software exports
Democracy and Rule-of-Law: Properly from India. In the latter case, there was
functioning financial markets require no hinterland advantage, location did not
a constitutional basis and machinery matter, democracy did not matter, and there
for system governance that is stable, was no beach-head. The six comparative
reliable, resilient and flexible; i.e. and competitive advantages that India has,
one that reduces future political suggest that there is a genuine opportunity
risks and uncertainty. Globally for India to create a viable able to
credible financial systems need to compete with the best in providing to
be rooted in legislative, judicial, and the Indian and global markets in a short span
regulatory frameworks that adhere of time. But, it confronts some daunting
to rule-of-law and respect/protect challenges. Our report highlights these in
property rights; in principle and detail. They include: (a) financial regime
in practice. can be provided governance in India; (b) missing markets
credibly only from environments that and institutions and (c) urban facilities and
permit open and honest expression governance in Mumbai.
of independent views by portfolio
managers, analysts, commentators, 7. Financial regime governance:
researchers, etc. even when such views
policy and regulation
contradict those of governments and
powerful personalities with a vested A sound basic framework for develop-
interest. India has proven strengths in ing/applying law and regulation are intrinsic
21. Executive Summary xxi
to . The quality and credibility of traded volumes – in all areas other than
provided from India is inextricably linked to equities. A normative rule-of-thumb
the soundness and global acceptability of the would suggest that the traded volume
regulatory/legal system that governs finance of an exchange-traded futures contract
in India. Global competition in is, to in India should be at least one-tenth the
an extent, a function of global competition turnover of a corresponding product in
(in terms of reputation, capability, efficiency the . By this yardstick, the turnover
and effectiveness) among regulatory regimes of Nifty futures is about that size. But
and the institutions that apply those regimes. that is not the case for almost all of the
The market share of an is determined as top underlying contracts in the .
much by the quality and reputation of its • An inadequate universe of institutional
regulatory/legal regime as by the abilities of investors: The second deficiency in
its financial firms. A cross-country assess- India is a universe of institutional
ment suggests that India is weak on many investors that have the size, visibility
aspects of the legal and regulatory frame- and capability of those in established
work governing its financial system which s. The progress made so far
the report discusses in detail. The report with liberalisation has been based
also identifies two key strategic institutional largely on speculative price discovery
(or structural) weaknesses in Indian finance by non-institutional investors in equity
that impede production: markets. Other segments are dominated
by state-owned entities which are
• ‘Missing’ Debt, Currency, and Deriva- bound by restrictive rules. Banks and
tives Markets: The most critical finan- insurance companies are restrained, if
cial market components missing in In- not banned, from undertaking risk-
dia are: a properly functioning bond hedging activities and other kinds of
market, a currency market and a deriva- sophisticated business due to regulatory
tives market for currencies and inter- restrictions. Consequently their assets
est rates. These three interlinked mar- are growing too slowly.
kets are termed collectively as the bond- Indian financial firms tend to operate
currency-derivatives ( BCD ) nexus in in one key business segment at a
this report. Six specific deficiencies time. Their portfolios are narrowly
in this respect include the absence of: confined and concentrated; so is their
(a) a liquid and efficient sovereign risk exposure. That has stunted their
bond market with an arbitrage-free growth, imagination and ability to
yield curve, (b) a wide range of handle risk. Indian financial firms now
essential derivatives on interest need to evolve into full fledged large,
rates, (c) a liquid spot market for - complex financial institutions (s in
denominated corporate bonds, (d) credit Basel parlance). They need to operate in
derivatives on credit spreads or credit all financial market segments of finance
events, (e) a liquid currency market and to come up with credible offerings
(f) a full range of currency derivatives. and ‘packages’ for the export market.
Under a functional nexus, all India lacks domestic commercial and
six elements are based on vibrant investment banks capable of taking on
speculative price discovery, and are global counterparts without higher levels
tightly knitted by arbitrage. They of capitalisation, global market access,
interact to result in market efficiency. operational expertise, and high-
There is no successful that lacks such level human capital. India also lacks
a nexus. Its conspicuous absence large securities brokerages capable of
in India handicaps the country’s ability competing with global counterparts.
to provide . Another shortcoming India’s brokerage industry reflects the
is the inadequacy of India’s spot and infirmities of its retail sector as a
derivatives markets – in terms of the whole. It is characterised by too
variety of contracts traded and their many small, undercapitalised, limited-
22. xxii R M I F C
capability firms (brokers and sub- regulation. There is no that has so
brokers) that are mostly still single compartmentalised an approach to the
proprietorships in corporate form. structuring, management and regula-
Structural reforms are required urgently tion of its financial markets. Reversing
to create Indian financial firms that are counterproductive segmentation of fi-
equivalent in size and capabilities to nancial markets in India, and removing
global counterparts. Looking ahead, barriers to entry, would result in greater:
if India is to create an , there is no economies of scale/scope, competition,
escape from inviting the participation and global market-reach.
of domestic and foreign institutional • Inhibiting Financial Innovation:
investors of adequate size, who would Whether an should be created for
deploy the economies of scale, global India to catch up with the world, or to ex-
market-reach and efficiency-enhancing ploit comparative advantage in a global
behaviour that is evident at other s. market, a considerably faster pace
Why does India have these weaknesses? of financial innovation in India is essen-
Close scrutiny of the regulatory regime tial. But, financial regime governance in
examines the origins of these infirmities India can only cope with change slowly.
through a matrix that identifies and analyses The regulatory approach to any change
restraints on the activities of different in the structure or functioning of the
financial firms in providing various . financial system is conservative, cautious
Such a matrix has been prepared as a and inconducive to innovation. As a
‘wallchart’ for this report. It outlines result India falls behind international
activities that take place at s and practice by the day in every market seg-
the kinds of financial firms that typically ment. The default signal emitted by
undertake them. A careful analysis of this Indian regulators when faced with any
wallchart reveals that, at present, most of new idea seems to be set at ‘amber’ if not
the activities that take place at s ‘red’. Innovative instruments, contracts
are banned or severely proscribed in India. and new ways of doing business are acted
The red ink across the wallchart – signifying upon in days in the three s. Such
activities banned in India – portrays the a pace of rapid progress is not found
license-permit-control raj that still operates in India. Basic contracts like interest
in Indian finance. It retards development rate futures and options have failed to
and sophistication of the financial sector materialise in this climate.
and inhibits exports. A pragmatic view
of these constraints highlights three urgent, Deregulation and liberalisation through
cross-cutting priorities for reform: the s have largely unshackled India’s
manufacturing sector, and much of its
• Competition Policy: India’s experience real economy. Competition, innovation
with liberalisation in the real economy, and scale economies in these sectors are
suggests that the most powerful tool for no longer blocked by the State. Yet,
having efficient and well-functioning somewhat dissonantly, a much higher degree
firms is competition. Application of of control continues to operate in key
sound competition policy in all market parts of the financial sector; despite the
segments of India’s financial sector is many regulatory reforms of the s. This
now a matter of urgency. financial governance regime now needs to
• Compartmentalisation of the Finan- be overhauled to create a more modern
cial System: Global competitiveness re- governance regime. It does not need
quires exploiting fully the economies traditional fine-tuning with the extant
of scale and scope. India’s hinterland regime remaining largely intact.
advantage represents an opportunity Regulatory reform has had a positive
to exploit such economies. However impact on the functioning of India’s capital
Indian finance has been artificially frag- markets and the insurance sector. In the
mented by financial sector policy and capital markets, India has achieved global
23. Executive Summary xxiii
standards in some aspects. Other financial in Mumbai. The goal of public
markets lag behind in not yet having been policy is to foster high economic growth
reformed as widely or deeply. Despite the and enhance welfare in India; it is not
presence of a large number of different types to cater to the interests of Indian firms
of banks, and despite incremental measures or their shareholders. But, in saying
aimed at ‘opening-up’, the banking market this, the is mindful of the reality
in India has yet to improve substantially that developments during the last decade
in competition, innovation and efficiency. have resulted in a debilitating anomaly
The improvements achieved at the margins for Indian financial firms versus their
have not yet permeated the banking system foreign competitors. In manufacturing,
as a whole. They are unlikely to, without the removal of barriers to imports was
a major reformative push and diminished accompanied by a simultaneous unshackling
public presence. of Indian firms. Indian firms were exposed
For that reason, a dramatic change to greater competition from imports and
in the governance regime for all financial the entry of foreign s in domestic
markets in India is now imperative. Without market space. But they were, simultaneously,
it India will not be able to create an given a transitional period and considerable
innovation-orientated financial system freedom in terms of formulating business
that can evolve and compete at a pace strategies and innovating.
commensurate with changes in the Indian The evolution of Indian finance,
economy and global finance. Such a in contrast, has resulted in growing
system would have the following activities dissonance between external competition
undertaken on a par with global norms: and a repressive license-permit raj. India’s
(a) continual innovation and improvement long and tortuous evolution towards de facto
in the design of financial products and convertibility (which in some respects is
customer services as well as in their delivery; not dissimilar to tariff reductions in the
(b) the rapid reintegration of segregated real economy) has not been accompanied
financial markets into more liquid and more by Indian financial firms being given the
integrated markets; and (c) the rapid growth same opportunity and room for manoeuvre
and market-induced consolidation of Indian to develop their competitive capabilities.
financial firms in a manner that enables They are at a disadvantage in coping with
them to achieve economies of scale. competition (for their clients’ business)
For this to be achieved, Indian financial from global providers operating in India
system regulation needs to be brought up and from abroad for two reasons:
to world standards. Regulatory attitudes, • First, key financial markets (i.e. the
policies, practices as well as institutional nexus and risk management) have
arrangements need to undergo a sea- been prevented from developing in India
change. They need to become more because of regulatory restraints. That
attuned to, and supportive of, the dynamism, has resulted in Indian financial firms not
growth and global competitiveness of the having the opportunity or the time/space
Indian financial services industry. Policy to develop domain knowledge and skill-
and regulation must adjust and adapt to sets in crucial areas e.g. global fund-
the needs of Indian and global financial raising or developing sophisticated risk
markets. Financial markets should not management products/services tailored
be artificially fragmented, segmented, to client needs.
compartmentalised. • Second, the same regulatory restraints
This report does not advocate using have deprived Indian financial firms of
the hinterland argument as a reason the freedom they need to develop and
for protectionism. Nor is the the necessary flexibility in formulating
making an argument for ‘self-sufficiency’. global business strategies. They have not
Instead the believes that India and had the scope for innovating for and
Indian financial firms should be globally thus developing the skills required to
competitive in providing through an compete with global providers.
24. xxiv R M I F C
The is clear that, in providing debt of centre and states, including on-
from India, there is no case whatsoever and-off-balance-sheet liabilities (such
for protectionism. The interests of Indian as pensions) and endorses a lower
customers, and that of economic efficiency, level (than the present %) for the
are best served by enabling them to choose total consolidated public debt-to-GDP
from the best providers in the world. ratio. A public debt ceiling should be
But, the asymmetry in policy that has placed bolstered by flexible triggers for actions
Indian financial firms at a disadvantage, to be taken by the Ministry of Finance
underlines the case for phasing reforms (e.g. accelerated sales of public assets
aimed at creating capabilities in a whose proceeds are used to liquidate
manner that enables Indian financial firms outstanding public debt if that is deemed
to be similarly unshackled in competing to appropriate) when the adopted debt
provide . ratio ceiling is breached. While the
did not wish to recommend a
particular debt ceiling ratio without
8. Reorienting the financial looking more deeply into the matter,
system towards IFS global experience suggests that ratios in
provision: A temporal the range of –% are widely applied
roadmap for reform as prudent. Such a debt ratio should be
added to existing measures for
The strategy proposed in this report for deficit and debt reduction.
creating an comprises in essence a ten- For an Indian to be credible, in
point agenda: keeping with ‘best-practice’ worldwide,
. Macroeconomic (i.e. Fiscal and Mone- India’s central bank should be indepen-
tary) Management. dent and separate from government. It
As a new competitor in global must be independent and separate from
financial markets, the credibility of government; i.e. in the same way that
India’s macro-economic policies, and the Federal Reserve in the , the
the quality of its macroeconomic and in Europe, the various national central
financial system management, will be banks of Europe and Japan, and the Bank
judged more stringently than in the case of England, are independent of and sepa-
of established s. This asymmetric rate from their governments. The central
reality highlights the importance of bank must employ global best-practices
redoubling efforts in reforming policies, in the conduct of monetary policy, in
legal and institutional arrangements to order to suffuse international investors
achieve and sustain a high growth rate and issuers with growing confidence in
(–%) for the economy in general and the as an acceptable global currency
the financial sector in particular. for transactions. The level of con-
Creating a vibrant, competitive fidence engendered should permit the
in Mumbai will require, as an integral to become one of the world’s major
backdrop, success in meeting the reserve currencies by or at the
legal commitments entered into by latest.
the Government of India, and the The gold standard for a stabilising
governments of individual states, to monetary policy is a transparent,
reduce the consolidated fiscal deficit on independent, inflation-targeting central
the timeline announced. In addition, it bank. With such an arrangement the
will require (a) reducing the total public Indian State would be: (a) underlining
debt/ ratio to more acceptable its commitment to delivering low and
levels; and (b) pursuing sound fiscal predictable inflation; and (b) inducing
and monetary policies thereafter. greater confidence in the in the eyes
HPEC therefore recommends that of domestic and global investors. The
further action should be taken to recommends that the Ministry
reduce more rapidly the consolidated of Finance consider: (a) reforming
25. Executive Summary xxv
monetary institutions in the light There is considerable unmet global
of recent developments in monetary demand for bonds on the part
economics; and (b) doing so in a way of long-term institutional investors
that bolsters the case for a credible such as foreign pension funds. A
in Mumbai. rapidly emerging bond market
also recommends a fresh look would trigger currency trading in India
at applying key principles in guiding and foster the use of currency
reform of the tax system on the revenue and interest rate derivatives. That
side, to ensure that India remains would facilitate the evolution of the
globally competitive, and avoids price as a global currency, used as
distorting subsidies on the expenditure a numeraire by bond investors and
side. This has particular implications for issuers from India and around the
ensuring that inflation-targeting is not world. Internationalisation of the
distorted or rendered ineffective because (a prerequisite for a successful in
subsidies (e.g. for key energy prices) Mumbai) would expand transaction
emit the wrong inflation signals. volumes in India’s bond, currency
. Strategy for Public Debt Financing. and derivatives markets, as well as
Traditionally, India has eschewed its equity and commodity markets,
bond issuance outside the country, fear- coterminously. It would expand the
ing the currency risk that arises with range of financing options open to,
issuing forex bonds while having and seignorage revenues derived by, the
revenues. This risk of ‘original sin’ does Government of India and its central
not arise if denominated bonds bank.
are sold to meet foreign demand for . Creation of the BCD Market Nexus.
such debt. The HPEC therefore advo- The most important missing piece
cates opening up fully to foreign invest- in Indian finance is the nexus ex-
ment in INR denominated sovereign plained earlier: i.e. the set of interlinked
bonds issued by GoI . It further recom- bond-currency-derivatives markets for
mends that no limits should apply to spot and derivative instruments on in-
purchases by foreign clients of INR de- terest rates, currencies and credit risk. In
nominated corporate bonds or bonds order to ignite these markets, HPEC rec-
issued by sub-sovereign entities (states ommends the immediate creation of a
and metropolitan administrations). In currency spot market, with a minimum
addition, the HPEC believes that the transaction size of Rs. million, acces-
function of a public debt management sible to all financial firms. In addition,
office should be placed in the Ministry an INR -settled exchange-traded cur-
of Finance rather than in a regulatory rency derivatives market should be cre-
institution to avoid any perceptions of ated, with trading in futures, options
conflicts-of-interest. and swaps on currencies, accessible to
This would achieve two goals. First, it all.
would open up a new financing channel These two initiatives, along with
for o (and state and municipal developing more rapidly the spot
governments as well) thus enabling market for bonds, need to be merged
it to abandon repressive policies that into the existing securities exchange
pre-empt domestic savings with an ecosystem so as to trade alongside
array of undesirable and unintended the spot and derivatives markets for
consequences (e.g. crowding out and equity. The policy problems that
undue pressure on the interest have held back interest rate futures
rate). Second, the internationalisation need to be rapidly resolved. The
of bonds (issued by the sovereign, responsibility for regulation of these
sub-sovereigns and corporates) would markets – spot or derivatives; exchange
accelerate the emergence of an Indian or ; government bonds, corporate
on the world stage. bonds, and currencies – needs to be
26. xxvi R M I F C
moved to without further ado . Create wholesale asset management
and unified with the regulation of businesses with freedom for outsourc-
all organised financial trading. The ing by existing financial firms such as
goal should be to create and launch a banks or insurance companies. This
significant nexus, in conformity would separate the legal and contrac-
with world standards, within months. tual structures through which assets
. Financial Market Integration and are sourced and securities are created
Convergence vs. Market Segmentation – across multiple front-ends across
the country – from the ‘factories’ in
Indian finance suffers from a frag-
which assets are managed. It would
mented approach whereby the overall
also achieve economies of scale in
financial industry has been cut up into
asset management.
pieces reflecting legislation that is out-
dated by years or more. exports . Shift away from regulation by entity
will not take place as long as the com- to regulation by domain. As an
petencies of Indian financial firms are example, IRDA would regulate only
artificially stunted. India now needs its the insurance business, not all the
own s present in all lines of busi- activities of insurance companies.
ness, and able to achieve economies of . Principles-based Regulation
scope and scale. A series of measures Over the decades India has built
are needed to achieve market integra- up a license-permit raj in finance.
tion and convergence, and thus enable It over-emphasises compliance at the
economies of scale, economies of scope, expense of competence, competition
greater competition and enhanced IFS and innovation in financial services.
export capability, i.e.: A similar raj dominated the real
economy since independence. But
. Redraft the legal foundations for it was dismantled during the s
organised financial trading, so as to the immense benefit of the Indian
to unify all organised financial economy and particularly Indian global
trading under regulation. This competitiveness. To achieve the same
would include currencies, equities, objectives, that raj in finance now needs
sovereign and corporate bonds, and to be dismantled if India is to develop
commodity derivatives. It would provision and export capabilities
immediately diminish some of the and if an is to emerge in Mumbai.
fragmentation which has taken place At present financial regulation in In-
amongst financial firms. dia is fragmented and rules-based. It is
. Remove barriers to a holding over-prescriptive and restrictive of man-
company structure through which agerial discretion. In every market seg-
virtual financial firms can be created, ment, regulators attempt to codify every
with an array of subsidiaries that fit detail of a business in which the shape of
Indian regulatory constraints but the future can neither be anticipated nor
with corporate headquarters and predicted. Anything not explicitly per-
top management able to operate mitted is banned. Any proposed change
a unified financial firm. The in the way of doing business requires
holding company would be regulated clearance from the regulator. Supervi-
only by the Companies Act. It sors apply checklists in verifying that
would typically be listed and able to every rule is met while not quite un-
leverage itself; while its subsidiaries derstanding all the dimensions of the
might be unlisted. All barriers to business possibilities of the regulated
M&A in finance need to be identified entity and how it might evolve. This
and removed, so as to achieve approach is inflexible and unamenable
a market-induced consolidation to swift adaptation of a kind that the
process which would permit Indian world of global finance demands. This
s to emerge. is counterproductive for the purposes