Saturday, Oct 19, 2002
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By K. T. Jagannathan
In a candid interview with The Hindu here today, Mr. Eldon, said HSBC did not want to take on too much and wished to make sure that "we can manage what we have now". Operating out of 14 cities, HSBC today had 31 branches in India, he pointed out. Thoroughly pleased with the changes that had swept the sub-continent, Mr. Eldon noted with a sense of gratification the strides HSBC had made in the field of Internet banking both at personal and business levels and also on the card business front in India. "We have been buying small bits of businesses of foreign banks which have been exiting the markets, grown credit card business significantly and started Internet banking. The best news of all is that the Securities and Exchange Board of India yesterday gave us the approval to do asset management business. We are building our business all the time," he elaborated, dismissing suggestions that HSBC was not as active in India as it was elsewhere in the globe.
"We will principally grow organically," he made it clear. HSBC, he said, had obtained new licences for Bangalore, Mumbai and Delhi and was set to establish branches in Jaipur and Ludhiana. Nonetheless, Mr. Eldon asserted, "if something came along from the acquisition perspective that met our criteria, it would be foolish on our part not to have a look at it".
Quizzed on how HSBC ranked India vis-a-vis its global strategy, Mr. Eldon said, "India is firmly established within the top 10 of the 80 countries where we operate". He went on to add: "We look forward to moving it up further in the list". Questioned on how HSBC viewed India in the wake of border tensions and lowering of ratings by global agencies, the Chairman made it clear that HSBC "is a commercial organisation" and that it would stay in a country "unless we cannot just operate there anymore". "We are in a country for the long-term. That is our preferred stance," he asserted. In this context, he cited the Argentina experience. HSBC got into that country a few years ago when it was "a darling of the IMF (International Monetary Fund)". "It was a good example of a Latin American country that was doing well. On the first day of the riot, our main office in the capital city ended up with 54 bullet knocks," he said. "Tensions are uncomfortable. But we may not leave". Notwithstanding the Indo-Pak border tension, HSBC foreign employees did not leave the bank, he said. HSBC, he pointed out, had even improved its investment into the country.
Queried on how crucial country ratings were for investment decisions of HSBC, Mr. Eldon quipped, "We have to make up our minds on a commercial basis". In his reckoning, rating agencies, over the years, had tended to be more cautious. "I am not saying that they are wrong in the assessments they make. But what they are rating is how they see a situation in a given point in time," he said. "Sometimes, one has to question whether they look into the longer term," he added.
Nevertheless, HSBC, he claimed, "takes a commercial view. We take soundings on the ground. We make our own decisions. We have access to people who know the country much better than the rating agencies do," he argued.
Asked if HSBC would convert the Indian operations into a subsidiary now that rules had been relaxed, Mr. Eldon said, "Our preference anywhere is to remain as an operating entity with branch network rather than being a subsidiary".
HSBC, however, had locally incorporated structures in Saudi and Malaysia, primarily because of the legislative compulsions imposed by these nations, he pointed out. Mr. Eldon was clearly impressed by the pace of reforms in India. Yet, he felt regulatory changes in select areas especially in the financial services field should be pushed a little harder.
On the question of regulating foreign banks, Mr. Eldon cited the `bold and pragmatic' initiative undertaken in New Zealand. The Kiwi regulators had placed the onus of overseeing the activities of foreign banks which had its headquarters outside the country on regulators of the host nation.
If these banks stepped out of line in New Zealand, the Kiwi authorities would let the regulator in host country know that they were not doing the right thing. He agreed that New Zealand and India were not comparable. Yet, he felt "some lessons could be learnt from New Zealand experience".
Asked to prioritise growth markets in the Asia-Pacific region, the HSBC Chairman felt Japan and Korea with ageing population were unlikely to show major growth potential. India, in his view, offered huge opportunities over a long-term. Though HSBC had expanded in countries like Indonesia which had large population, the political situation there did not inspire confidence, he said.
He also saw opportunities in Malaysia as well.
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