Proceedings Report:

National Summit on “Financial Services

– A Key Driver for Economic Growth”

Date: 19th February 2014 Venue: GIFT One Tower, GIFT City,

Gandhinagar

Event Partners Organizing Partner National Partner Knowledge Partner:

:

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Contents Foreword ....................................................................................................................................................... 3

Introduction .................................................................................................................................................. 5

Session Theme: “What do we need to do in order to make India A Global Financial Hub of the World” ... 5

Business Session: Need for Global Financial Hub for Efficient Financial Services ........................................ 5

Session Details .............................................................................................................................................. 6

Opening Remarks by Chairman of the Session: Mr. Sudhir Mankad, Chairman, GIFT City................... 6

Theme Presentation by Mr. Utkarsh Palnitkar, Partner, Head of Advisory Services, KPMG ................. 6

Theme Presentation by Mr. Shailesh Vaidya, President, IMC: “Need for Global Financial Hub” .......... 7

Mr. Ramakant Jha, Managing Director and Group CEO, GIFT City: “Development of India’s first

Global Financial Hub at GIFT City” ........................................................................................................ 9

Plenary Session 1 ........................................................................................................................................ 10

Opening Remarks – Dr. Varesh Sinha, IAS, Chief Secretary, Government of Gujarat ......................... 11

Address on the Concept of Global Financial Hub – Shri Hari Sankaran, VC & MD, IL&FS ................... 12

Handing over of Allotment Letters by the Hon’ble Chief Minister, Government of Gujarat ............... 12

Address by Chief Guest, Shri Narendra Modi, Hon’ble Chief Minister, Government of Gujarat ......... 15

Vote of Thanks – Dr. Hasmukh Adhia, IAS, Additional Chief secretary, Finance, Government of

Gujarat ................................................................................................................................................ 16

Plenary Session 2: Global Financial Hub – A Way Forward......................................................................... 17

Ms. Chanda Kochhar, MD & CEO, ICICI Bank Ltd. ............................................................................... 17

Mr. S.S. Mundra, Chairman & MD, Bank of Baroda ............................................................................ 18

Mr. Aditya Puri, MD, HDFC Bank ......................................................................................................... 20

Mr. G. Srinivasan, CMD, The New India Assurance Company Ltd. ...................................................... 20

Mr. A.K. Roy, Chairman cum Managing Director, General Insurance Corporation of India ............... 21

Mr. Arun Agarwal, Chairman, Insurance Committee, IMC ................................................................. 22

Mr. Asit Bhatia - Managing Director and Co-Head of Global Corporate and Investment Banking,

Bank of America, N.A. ......................................................................................................................... 23

Summing up and Vote of Thanks: Dr. Hasmukh Adhia, IAS, Additional Chief Secretary, Finance,

Government of Gujarat ............................................................................................................................... 24

Findings…………………………………………………………………………………………………………………………………………………24

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Foreword

Dear All,

Vibrant Gujarat 2015: National Summit on “Financial Services: A Key Driver for Economic Growth”

Until very recently, cities like London and New York were the nuclei of financial services and have been

serving as “Global Financial Hubs (“GFHs”) to the world. However, the rapid development of technology,

enhanced cross border capital movement, increasingly global clientele and primarily the emergence of

China as a global manufacturing hub and India as a key IT service provider, has given birth to several

other financial hubs. The likes of Tokyo, Hong Kong, Dubai and Singapore have shown that opportunities

exist for the establishment of new global and regional financial hubs.

The development of Global financial hubs is inevitable for bringing about growth and efficiency in the

financial sector.

Narrowing down on India, the rapid growth in the economy over the past couple of decades has led to a

demand for a robust financial market with easy access to capital and rapid transaction of money.

Needless to mention, the growth of Indian financial sector, with a total asset size of the USD 1.5 trillion

and employment base of more than 4 million people, is strongly correlated to the growth of Indian

economy. The economy has witnessed increased private sector activity including expansion of foreign

banks, insurance companies, mutual funds, venture capitals and other investment institutions,

resoundingly reflected in the pace of our growth.

Geographically, Indian firms are now spreading far beyond the US and EU by establishing a direct

presence or acquiring companies in China, Australia, ASEAN, Central Asia, Africa and the Middle East. In

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the process of undertaking & managing outbound investments, Indian companies require a range of

international financial services for which they are approaching established GFHs such as New York,

London, Singapore, etc.

It is, thus, imperative for India to emerge as a Global Financial Hub to cater to the ever increasing

domestic demand and benefit from the internationalization of financial services.

The evolution of a city into a global financial hub is dependent on a large number of internal and

external factors. A primary distinguishing factor of a GFH such as London or New York is the magnitude

of financial activity and transactions that take place within its borders. Other factors contributing

towards the establishment of a GFH include: high quality, reliable and sustainable physical and ICT

infrastructure; skilled manpower; fair and transparent legal system; free flow of capital among others.

As a part of Vibrant Gujarat Global Investors Summit, 2015, Finance Department, Government of

Gujarat organized a seminar on “Financial Services – A Key Driver for Economic Growth”

The Summit was organized with the aim of recognizing the prerequisites and need for India to transform

itself and emerge as a Global Financial Hub. It intends to pave way and provide a direction for the

development of financial services as a key driver for economic growth.

The Summit brought together senior government officials from centre and state, policy makers,

representatives from leading international and national financial institutions and private players from

banking, insurance, asset management, global portfolio diversification, exchanges, mergers and

acquisitions, corporate treasury management operations, consultants, etc.

The proceeding of the Summit including important highlights of the discussion is placed herewith for ready reference. I am sure you will find the deliberations and outcome of the event very enriching and I hope that they would pave way for developing a world class Global Financial Hub in India. Best Wishes, R. K. Jha (Managing Director and Group CEO, GIFT City)

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Introduction

Over the last few decades, some of the GFHs like New York and London have shown tremendous

contribution to the economies of their respective nations. The share of jobs provided by these GFHs has

also increased phenomenally. In 2013, the finance and insurance sectors employed more than 350,000

people in London, around a third of UK employment in these sectors. In case of New York, the Wall

Street itself employed over 200,000 people. Moreover, banks in the United States hold total assets

amounting to about 85 percent of the country’s gross domestic product. In Britain, the banks hold

almost 400 percent more money than its GDP, mainly because of the huge volume of international

business taking place there.

The growth in the Indian economy has also witnessed the emergence of a robust and nimble financial

services sector in the country. As a key driver of economic growth, the financial services sector is bound

to witness significant growth as the Indian economy continues to grow in the future.

To capitalize on the mounting domestic demand and increasing volume of borderless financial

transactions, it is an opportune time for India to emerge as a GFH and place itself in the Ivy League of

the financial nations. GIFT City, through its offerings, would build an ecosystem to service institutions

like Banks, Exchanges, Insurance companies, etc., out of its facility. These will be supported by state-of-

the-art internal infrastructure encompassing all basic urban infrastructure elements along with an

excellent external connectivity, ICT infrastructure and suitable social infrastructure essentials.

In the above context, Finance Department, Government of Gujarat organized a National Summit on

“Financial Services: A Key for Economic Growth” in Gandhinagar on 19th February, 2014.

This seminar was one in the series of seminars on various focus sectors being organized by Government

of Gujarat as part of Vibrant Gujarat 2015 Summit, for which GIFT was the Organizing Partner, FICCI and

IMC were the National partners, iNDEXTb was the Event partner and KPMG was the Knowledge Partner.

This report documents the key discussions held during the Seminar.

Session Theme: “What do we need to do in order to make India

A Global Financial Hub of the World”

Business Session: Need for Global Financial Hub for Efficient

Financial Services The seminar was organized with the objective of bringing together leaders of Banking and Insurance

companies and senior government officials from Centre and State to facilitate development of

pragmatic rules, procedures and facilities which would expedite the development of envisaged GFH in

the country.

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Recognizing the need for a GFH in India, the State government of Gujarat has initiated the set up of a

world class centre for the financial services industry, the Gujarat International Finance Tec-City (GIFT

City). GIFT City aims to cater to India's large financial services potential by offering global firms state-of-

the-art infrastructure and facilities and aspires to attract top talent in the country by providing high

standard of living and an enhanced quality of life.

Session Details

Opening Remarks by Chairman of the Session: Mr. Sudhir Mankad, Chairman,

GIFT City

Mr. Sudhir Mankad initiated the Summit by

presenting the Opening Remarks. He commented

that for very long, Mumbai was seen as the

financial capital of the country and even though

most of the businessmen there were of Gujarat

origin. In the last 50 years, Gujarat has achieved a

remarkable progress in various fields like

manufacturing, chemicals, automobiles,

diamonds, agriculture, etc. Hence, when Gujarat

is on such a progressive road, it is imperative that

Gujarati businessmen use the business

infrastructure of the state and not go anywhere

else. Gujarat is an emerging financial hub and

with the presence of GIFT City, business can be

conducted more smoothly and effectively. He mentioned that GIFT City will help connect Financial and

IT sector personnel from across the globe and provide a common platform to operate from.

Theme Presentation by Mr. Utkarsh Palnitkar, Partner, Head of Advisory

Services, KPMG

Mr. Utkarsh Palnitkar presented the Theme address. He mentioned that a Financial Hub is no different

from a cluster, which has the capacity to attract both capital and fuel the growth of an economy. As in

case of any cluster, the cycle commences with the presence of one anchor player/ investor like an

institution and blossoms when it expands horizontally with the appearance of firms which produce

complimentary products and services.

He mentioned that from a financial cluster point of view, there are primarily three factors which decide

or impact its success, as also observed in the earliest clusters of New York and London. These are: pool

of money to lend and invest, robust and supportive framework such as legal, regulatory, technological

and infrastructural and, high-quality human resources. Another distinguishing factor in case of London is

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the presence of the International Court of Arbitration. An ensemble of these factors in turn is attracting

business in these hubs. The common theme which emerges in these two GFHs, is the same theme

resurgent in the emerging financial center of Dubai, Singapore and Hong Kong.

Talking about India, the economy has been

experiencing a tremendous growth, which has

also fueled the demand for a sound financial

sector providing access to capital and other

financial products. With high FII inflows,

expanding middle class, double digit growth in

derivatives market as well as credit off take,

and increasing number of IPOs, FPOs and M&A

activities, India is poised to emerge as a

leading financial center.

However, there are several challenges that

need to be addressed. Though already strong

in human capital, India needs to focus on skill

development as well as providing a higher

quality of life to attract international and

domestic skilled professionals. We have already made our mark in the world in terms of ICT. Given

financial firms are early adopters of technology; our technology acumen needs to be focused towards

enabling a faster and easier transmission mechanism to make markets more efficient.

In this context a highly noteworthy step is the initiative from Government of Gujarat, “GIFT City”, which

aspires to cater to India’s large financial services potential by offering global firms world-class

infrastructure and facilities. And it is only a matter of time that we will see GIFT City and thence India

emerging as a Global Financial Hub.

Theme Presentation by Mr. Shailesh Vaidya, President, IMC: “Need for Global

Financial Hub”

Mr. Vaidya began his note by extending a warm welcome to all the dignitaries and congratulated the

Hon’ble Chief Minister Shri. Narendra Modi and the Government of Gujarat for organizing the National

Summit on Financial Services: A Key driver for Economic Growth. He believes that this is an opportune

time to organize such a Summit when India aspires to be an economic superpower and is on the way of

emerging as the third largest economy after USA and China. Without a doubt, Gujarat, as it is today, is

due to the vision and ability of Hon’ble Chief Minister Shri. Narendra Modi to cumulatively make the

government officials and people work together. He said that what India is to Asia, Gujarat is to India. It is

a role model state for the rest of the country and complimented the state government for getting

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together over 250 top Executives of the financial sector. Gujarat Government’s endeavor to establish

GIFT City as a Global Financial Hub has been received very well the world over.

Further talking about Indian Merchants’ Chamber (“IMC”), which was institutionalized 107 years back,

he mentioned, is today the apex body of trade, commerce and industry in the region. It represents

interests of many diverse sectors including banking and financial services. IMC plays an effective

advocacy role and assists in formulating

proactive policy and reforms. IMC’s

theme for this year is “sustainable

development” and in this respect,

financial inclusion is particularly

important.

India today certainly has all the

ingredients to become a Global Financial

Hub. These include: a young population,

widespread banking network, vibrant

financial services sector, throbbing

capital market, a functional democracy,

large English speaking population and

pool of skilled manpower, well defined

legal infrastructure, innovative corporate

sector, huge FOREX and inward

remittances, low cost of operations, etc. Not only domestically, but Indian firms have showcased huge

success overseas too, particularly in the USA. India has one of Asia’s most developed and sophisticated

stock markets and an apex bank like RBI. There exists immense opportunity in expanding the scope of

international financial services in India and as Indian financial sector continues to grow and mature, we

could easily consider serving the financial needs of an international clientele and provide financial

services to a borderless world.

Growing share in the world trade and cross border investment is making unprecedented domestic

demand for a need of GFH within the country. According to a study, if by 2015 India fails to move rapidly

on the trajectory of economic reforms and internationalized financial services, India could lose up to

USD 48 billion every year.

There exists, however, certain institutional deficits in the Indian financial sector which increase the cost

of international transactions thereby hampering the growth of the sector which need to be addressed

immediately.

To bolster the growth of the financial sector including insurance, IMC has been regularly organizing

international annual conferences. One of the recent ones concluded that India has the capability, the

opportunity and the need to create an international hub for reinsurance which will flag our presence in

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the domain of financial sector and our position as an economic superpower. IMC has initiated a dialogue

between the reinsurance community and key players in the insurance space with the Chairman and

members of the Parliamentary Standing Committee on Finance.

He concluded by saying that we have all that it takes for a nation to emerge as a Global Financial Hub

complimented with a young demographic profile which needs to be trained and tapped.

Mr. Ramakant Jha, Managing Director and Group CEO, GIFT City:

“Development of India’s first Global Financial Hub at GIFT City”

Mr. Jha began his address by reiterating that

there are three major components which

contribute in the making of a Global Financial

Hub: domestic demand for financial services,

pragmatic policies and infrastructure &

facilities. What the Gujarat Government has

attempted is to cover the third component, i.e.,

infrastructure at par with other Global Financial

Hubs. This is with the intention of bringing

various components of financial services

together and provides economy of

agglomeration. GIFT City in this regard, is the

first such attempt in the country. It is first of its

kind in scale (~ 90 million square feet of real

estate) 1 , scope and quality targeting the

financial services and IT/ ITeS sector. It is being

built under the public private partnership of Government of Gujarat and IL&FS. It also intends to create

0.5 million direct and 0.5 million indirect jobs.

He pointed towards various advantages of GIFT City. They are listed below:

Globally benchmarked International Finance centre

Multi service SEZ with processing and non – processing areas

Strategic location (15-20 minutes from Ahmedabad international airport)

State of the art infrastructure including robust ICT network

Integrated residential area with walk to work benefit

Social infrastructure encompassing facilities like schools, entertainment malls, hotels, leisure, etc

a. West India Hospitality, ITUAL, Sterling Addlife India and Narsee Monjee Educational Trust

school will have their establishments in GIFT City

1 Size is almost three times of Bandra – Kurla Complex, Mumbai

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Urban mobility is more public oriented including BRTS/ MRTS/ Roads to serve a minimum of 2

million trips2

Uninterrupted power supply (efficiency of 99.99%, i.e., almost 0% outage)

Next generation waste and water management along with district cooling

a. GIFT City will run on the principle of zero discharge and automated solid waste management

Single Window Clearance

The concept of GIFT City leverages on the need for a consolidated and agglomerated infrastructure for

the growth of financial services. It brings together various stakeholders of the industry at one place. He

concluded by inviting the industry to GIFT City and help in transforming India into a Global Financial Hub.

This was followed by a video presentation on GIFT City and presenting of mementos to the dignitaries.

Plenary Session 1

Session Theme: What do we need to do in order to make India A Global Financial Hub of the World?”

The dignitaries present on the dais were: Shri Narendra Modi, Hon’ble Chief Minister, Gujarat, Shri

Nitinbhai Patel, Minister for Finance, Health, Medical Education, Family Welfare and Transport,

2 GIFT is expected to create almost 1 million jobs

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Government of Gujarat, Shri Saurabhbhai Patel, Minister of Energy & Petrochemicals, Mines & Minerals,

Cottage Industry, Salt Industry, Printing, Stationery, Planning, Tourism, Civil Aviation and Labor &

Employment, Government of Gujarat, Dr. Varesh Sinha, IAS, Chief Secretary, Government of Gujarat,

Shri G R Aloria, IAS, Additional Chief Secretary, Department of Urban Development and Urban Housing,

Government of Gujarat, Mr. Sudhir Mankad, Chairman, GIFT City and Mr. Shailesh Vaidya, President,

IMC.

Shri Ramakant Jha, Managing Director & MD, GIFT City welcomed Hon’ble CM Shri Narendra Modi, Shri

Nitinbhai Patel and Shri Saurabhbhai Patel.

Opening Remarks – Dr. Varesh Sinha, IAS, Chief Secretary, Government of

Gujarat

Dr. Varesh Sinha in his opening remarks welcomed Hon’ble CM Shri Narendra Modi and all other

dignitaries present. The importance of the Financial Services sector in India’s economic growth was

highlighted. It was mentioned that lack of conducive policies and world class financial hubs in the

country have hindered the Indian Banking and Insurance institutions in acquiring global status. It is also

because of these constraints that the Indian banking institutions are forced to setup their offshore

banking services in foreign

shores. Citing Mckinsey’s

report on Financial Services

sector in India, it was

emphasized that if India

expands and invests in

creating International

Financial hubs, the

contribution made by the

financial services in India’s

GDP can significantly grow by

15 to 20 %. This also has the

potential of creating around

10-11 million jobs in the

country by 2020. The vision

of Gujarat’s Hon’ble CM Shri Narendra Modi in developing a world class Global Financial Hub at GIFT

City, Gandhinagar is to tap the enormous potential that financial sector offers. It was expressed that

GIFT City will provide a conducive environment to the financial institutions for doing business along with

providing quality lifestyle to the residents. This will eventually result in accelerated economic growth of

the state and country.

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Address on the Concept of Global Financial Hub – Shri Hari Sankaran, VC & MD,

IL&FS

Shri Hari Sankaran in his address valued the visionary initiative of Hon’ble CM Shri Narendra Modi in

developing a world class financial hub in GIFT City, Gandhinagar. It was mentioned that the GIFT City

initiative has helped propel the financial service sector in Gujarat to balance its growth in agriculture and

manufacturing sector. Comparing the international and national average of active investors in capital

markets, it was highlighted that 24.1 percent of Gujarati households in the state are active investors,

which is equivalent to the averages of countries like USA and Canada. The scaling and availability of

skilled workforce for the services sector, especially in financial and IT services has helped Gujarat in

attracting investments from companies like Tata Consultancy Services Ltd., which has its largest

development centre’s in Gandhinagar. Highlighting the fact that GIFT City will comprise of 90 million

sq.ft. of world class infrastructure, it will be among one of the densest cities in the world matching the

likes of Dubai, Hong Kong and Singapore.

The average banking

transactions in the country

today costs between INR 2 - 4,

which in the case of GIFT City

will be only between INR 0.25 -

0.75. GIFT City also offers one

of the most advanced and

modern ICT platforms that will

support big data analytics and

data mining needed in the

financial services sector. GIFT

City’s robust infrastructure

guarantees 24 X 7 round the

year uninterrupted power

supply with reliability rate as

high as 99.99 percent per annum. GIFT City already has data networks needed for supporting the back

office operations of financial services. Due to the global economic slowdown, GIFT City faced challenges

in attracting both national and international investors. However, with the economic revival, many

international institutions have shown interest in the GIFT City. Talking about the future plans, it was

informed the GIFT City will soon commission an international school, a multi-specialty hospital and a

tier-4 data center. He concluded by saying that prospective investors need to look at the value

proposition GIFT City has to offer.

Handing over of Allotment Letters by the Hon’ble Chief Minister, Government

of Gujarat

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Allotment letters were handed over by Hon’ble CM of Gujarat, Shri Narendra Modi to:

1. Mr. Ashish Bhalla, Managing Director, WTC Noida Development Company Pvt. Ltd and Eric Dahl,

CEO, World Trade Centre Associations, USA for development of the World Trade Centre in GIFT

City.

In his acceptance speech Mr. Ashish

Bhalla said WTC Association is

privileged to be a part of a visionary

project like GIFT City. Highlighting

WTCA’s global network in around 100

countries and 330 cities, it was

mentioned that the association has

helped in enabling trade, nurturing

entrepreneurship and catalyzing

growth. It was also expressed that

WTC’s serve as landmarks for the

regions they serve by providing access

to markets, finance and venture capital, services and world class infrastructure. He expressed that

WTC at Gift City will be an architectural ethos in sync with Gujarat’s cultural and architectural

lineage and will be dedicated for financial and allied services. It will also host various services

offered by WTCA to the corporate houses and would also promote SMEs.

2. Mr. A N Appaiah, Chief General

Manager, SBI, Ahmedabad. Upon

acceptance, he said that SBI is proud

to be one of the early entries in the

prestigious GIFT City and celebrates its

close association with Gujarat. He

thanked the Hon’ble CM for giving

them the opportunity to set up

operations in the GIFT City.

3. Mr. Sanjay Baweja, Chief Financial Officer, Tata Communications Ltd. for development of India’s

largest Tier IV Data Centre, which will also be the first LEED certified Green Data Centre. He

mentioned that Tata Communications Ltd is proud to be associated with the state of the art GIFT

City and for the faith entrusted in them to set up their Greenfield operation.

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4. Mr. Kaushal Choksi, Chairman,

iPlex India Pvt Ltd for setting up

outsourcing centre for foreign markets in

GIFT SEZ

5. Mr. Prabodh Thakker, Chairman, Global Insurance Services (India) Ltd for development of Skill

Development & Training Centre for

insurance and related services. In

his acceptance speech, he

mentioned that the company is

honored to be a part of the GIFT

City and feels that this is a great

opportunity for the entire sector,

and that everyone should make the

most of it. The insurance sector,

despite the current global crunch is

growing at nearly 15 percent and

there is a huge demand for skilled

professionals. He hopes that the

effort of Global Insurance Services (India) Ltd at GIFT City shall fulfill this demand.

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Address by Chief Guest, Shri Narendra Modi, Hon’ble Chief Minister,

Government of Gujarat

The Hon’ble Chief Minister of Gujarat, Shri Narendra Modi, said that the financial institutions in India

have contributed immensely to the country’s economic development. He added that in order to further

leverage on the growth of this sector, there has to be an inclusive blend of our natural capacity, talent,

financial skills and intellectuals along with robust Information Communication Technology

infrastructure. In this era, when the Indian economy is more sensitive to the movements in the global

market, we can only perform by having a more sustainable and concrete set of reforms especially for

sectors like banking and insurance.

Highlighting GIFT City’s modern urban design and robust infrastructure, he said that for a country like

India it is imperative to develop new cities that have ultra-modern infrastructure and facilities. In GIFT

City, it is estimated that around 2.5-3 lakh people will live and will be able to walk to work. GIFT City

envisages becoming a global hub for high-tech financial services. This needs pragmatic institutional

framework with policies and rules. The GIFT City project is turning Gujarat’s business acumen and

economic-management from a dream to reality.

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Hon’ble Chief Minister emphasizing on Gujarat’s development model said that job creation was the

main objective, along with skill development. He urged to also focus on the development of a ‘Talent

Pool’ for the financial sector along with the need to develop infrastructural facilities and technologies

that are coherent with global economy.

Shri Modi said that India has enormous and unique talent in the Gems - Jewelry sector but it is limited

only to the low-end jobs of diamond polishing and cutting. In the technology sector too, India has made

impact only on lower-end works like outsourcing and BPO. India though has enough intellectual man-

power; we still haven’t commercialized on that to deliver high – end services. Emphasizing on India’s big

information technology base, Shri Modi said that India can capitalize on opportunities in the cyber

technology space by providing real time services for ensuring data security to the entire world.

With the vision of providing the financial services sector with high-tech infrastructure, skilled

manpower, talent planning, Shri Modi has invited the industry to be partners in GIFT City.

Vote of Thanks – Dr. Hasmukh Adhia, IAS, Additional Chief secretary, Finance,

Government of Gujarat

Dr. Hasmukh Adhia expressed his deep sense

of gratitude to all the Chairmen and CEOs of

banks and insurance companies who kindly

accepted the invitation from the Chief

Secretary to come for the seminar on a very

short notice and gave some very useful

suggestions. He expressed his concern over

certain suggestions regarding regulatory

framework being not within the powers of the

state but ensured that those suggestions

would be presented to the Government of

India. He also highlighted the fact that Gujarat

has the first Special Economic Zone (SEZ) in

the country related to financial sector and

welcomed everyone to invest in the SEZ. He

also thanked the co-sponsors of the event with a special mention to Mr. Sudhir Mankad, Chairman, GIFT

City, and Mr. R.K. Jha, MD, GIFT City for organizing the event. Finally he thanked the Hon’ble Chief

Minister of Gujarat, Shri Narendra Modi, for being a part of this event and for sharing his valuable

thoughts.

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Plenary Session 2: Global Financial Hub – A Way Forward

Session Chair: Dr. Varesh Sinha, IAS, Chief Secretary, Government of Gujarat

Theme 1: Policy changes required by Government of India for Global Financial Hub – Banking

Perspective

Ms. Chanda Kochhar, MD & CEO, ICICI Bank Ltd.

She highlighted the fact that India has an advantage of a large growing financial market to provide the

critical mass to become a global financial hub. Besides, India also has the money to invest within the

country which will bring more foreign investment. India has seen globalization of Indian firms which has

created the demand for a global financial hub in India.

Amongst various other

advantages of India, the nation

has a huge young population

with the skill set of English

language. India is in the initial

stage of financial services as

KPO’s and BPO’s are already

present here related to

financial services, and now it is

time to take India to the next

level and make it a global

financial hub.

She pointed that in addition to

the infrastructure needed to

carry out financial services, there is also a need to deepen the debt market substantially. In order to

make India a global financial hub we need to first bring back growth and vibrancy in the domestic

economy. The next step is associated with regulation, legal environment and taxation. She pointed out

that regulations should promote and allow innovation in financial services, taxation should be such that

allows a conducive business environment. Besides, consistency in regulations and taxation policies is

equally important. She pointed out that due to non conducive tax policies and regulations, financial

services are outsourced from India. There are limitations on lending of foreign currency by Indian

branches to business houses due to which these services are also outsourced to foreign branches of the

banks present in India.

There is a need to bring back the Indian business which was gone offshore related to financial services.

This will lead to huge amount of revenue generation, employment generation and vibrancy around

financial services within the country.

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She concluded by saying that besides regulation changes, India should now start providing financial

services to nearby countries like Sri Lanka, Bangladesh etc. slowly targeting the whole of Asia.

Mr. S.S. Mundra, Chairman & MD, Bank of Baroda

Mr. S.S. Mundra began by saying that the need for global financial hub is no more a question of debate,

or whether it is relevant or

beneficial. He mentioned that

when the thought of creating

Mumbai as a global financial hub

was envisaged, it was estimated

that the global financial service

sector has a market value of USD

13 billion in India. If the economy

grows at the then base rate, this

sector has the potential to grow to

USD 45 billion by 2015 and if the

economy grows at 8-9 percent

then the sector will touch USD 70

billion by 2015 and by year 2025 it

will reach USD 125 billion.

He explained that there are eight imperatives for government to set up such a financial hub:

1) Creation of a world class financial institution – For this, existence of best in class banking systems

are a must. He suggested that the government could dilute their holdings in smaller banks and

channelize that money to the six largest national banks, which have 44 percent of market share in

the Indian banking sector. And operational freedom could be provided to these banks so that they

can compete with private sector banks.

2) Authorities need to create a BCD (Bond, Currency and Derivative) nexus - He mentioned that there is

no global financial centre which lacks a BCD nexus and its absence in India has stunted the ability to

provide a conducive environment to the financial sector. He mentioned that there are 6 deficiencies

in this respect:

Liquid & efficient sovereign bond market with an arbitrage free INR yield count

Wide range of essential derivatives on INIR interest rate

Liquid spot market for INR denominated corporate bonds

Credit derivatives and credit spreads

Liquid currency market

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Full range of currency derivatives

3) Appropriate regulations – Mr Mundra mentioned that there is a need to place appropriate

regulations, which are neither too light nor too hard and the outcomes of which are predictable and

fair. Besides, there must be a system of quick regulatory clearances. This is critical for innovation

which is the key to success for any global financial hub.

He emphasized that the emergence of a global financial hub in India can happen by adopting either

of the two strategies:

a) Phase 1 (2-3 Years): Indian financial system can be consolidated, regulations can be enacted and

linkages to the global financial hubs can be strengthened

Phase 2: In phase 2, fully liberalized and deregulated global financial system will start to come in

effect

b) By creating a deregulated special territory like DIFC Dubai

4) Core infrastructure needs to be developed - Mr Mundra said that these centres require huge

physical infrastructure to run successfully. In global financial hubs, transactions of billions of dollars

take place each second and at that time there cannot be any outage of electricity or communication

and we must be conscious about it.

5) Openness to foreign entry and favorable policies - As per the World Bank report, India’s rank for

doing business is 134th out of 189 countries, and as per Global Financial Centre Index (GFCI), India

ranks 66th out of 79 countries. Mr Mundra emphasized that these are fair indications and that the

environment, infrastructure and policies all have to move in unison.

6) Avoidance of access taxation- Mr Mundra said that this is applicable on both corporate and

individuals and huge sensitivity is required in this direction. The living cost in India is low but it is

neutralized by high taxation which is a disincentive.

7) Global financial centres move from rule based supervision to principal based supervision

8) Human Capital- Mr Mundra mentioned that it is an extremely important imperative. Indians have

significant presence across global financial centres. But we still don’t have institutions like the

London Business School, the London School of Economics etc. and it is important to have institutions

like IIT for financial services.

He concluded by saying that if these imperatives are present and work in tandem with each other, India

can emerge as a global financial centre.

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Mr. Aditya Puri, MD, HDFC Bank

Mr. Aditya Puri mentioned that for India to have a global financial centre, global financial players must

see India as a preferred destination than other countries like Singapore, London, Hong Kong etc.

To have a global financial hub we require human capital which has the knowledge of finance, legal and

compliance. Besides, we require world class

telecom infrastructure and GIFT City is good

example of it. We need state of the art IT

systems coupled with capabilities to develop

and maintain sophisticated systems that are

required by financial centers. We require

complete array of financial systems like

liquid market, bonds, commodities and

derivatives.

He pointed out that for a successful global

financial hub there should be presence of

global firms and 24 hours trading. India has

an advantage as it is the 11th largest

economy and there is a huge domestic

demand for an in house financial hub.

Besides, there is a strong requirement of

wealth management in India. We need

global tax management, treasury management, global trading, project finance, merger and acquisitions

and demand for these will increase. Currently, we are outsourcing nearly USD 50 billion work related to

these services.

He explained that there is a need to curb inflation because without that CRR and SLR can’t be brought

down which are necessary for derivative markets to run. The country should also have a clear, well

defined set of laws and frequent amendments should not take place as these will change the outcome

of the investments done by the individuals or corporate.

Theme 2: Policy changes required by GoI for Global Financial Hub – Insurance & Re-insurance

Perspective

Mr. G. Srinivasan, CMD, The New India Assurance Company Ltd.

Mr. G. Srinivasan mentioned that India is an insurance hub for both direct insurance and reinsurance. He

pointed out that general insurance has a market of INR 80,000 crore in the current financial year and is

expected to reach INR 5,00,000 crore by year 2020. It will continue to grow at a CAGR of 600% in the

next 12 years and there is no other sector which will show such unprecedented growth.

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Reinsurance sector also has a positive perspective in the near future as India has a large number of big

companies with high net worth and capacity to insure. This is complemented by the huge pool of skilled

personnel with extensive experience.

However, there are still some factors which are hampering the growth of insurance sector and stopping

India from becoming a global insurance hub. There is a need to simplify the procedures and make the

environment conducive for both domestic and foreign companies to operate. Existing technical and

physical infrastructure needs to

be updated. There is also the

need to revisit Indian

regulations which are rule based

and change them to principal

based regulations as they are

simple and more effective. He

mentioned that there is a need

for change in the laws and many

of the amendments are in

parliament for clearance which

must be enacted. Besides, the

bond market and debt market

should also be strengthened for

attracting investment in

insurance sector. The Indian

legal system is also not as

prompt and responsive as other

developed countries and enough impetus should be given for the development of talent pool and on

education in the insurance sector. In conclusion he said that if we can make these small changes than

India can become a global financial hub.

Mr. A.K. Roy, Chairman cum Managing Director, General Insurance

Corporation of India

Mr. A.K. Roy said that insurance and reinsurance

services are an integral part of financial services. He

mentioned that India has a supporting talent pool and

infrastructure for this sector but lacks the supporting

regulatory environment. India lacks laws for

reinsurance and as this is a global business and funds

flow globally, this sector requires separate laws in

order to provide a more business friendly environment

to the companies. He explained that to set up financial

hubs in reinsurance sector participation from foreign

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firms is necessary which is only possible when there are favorable policies and regulations.

In the end he gave the examples of DIFC and Singapore financial hub and said that we should learn from

them and implement their practices in India for the development of financial hub in the country.

Mr. Arun Agarwal, Chairman, Insurance Committee, IMC

Mr. Arun Agarwal presented his views on the importance of Reinsurance in India and the need to

establish a sound insurance vision for the country as a whole. He mentioned that insurance sector was

neither an activator nor a proponent of the financial crisis of 2008. He highlighted some of the

differences between the Banking and the Insurance/ Re insurance sector, pointing out that the

Insurance industry was not subject to systemic risks; and that the liabilities of Reinsurance companies

were much more liquid than that of banks.

He then illustrated the following reasons as to why Reinsurance branches are essential for India:

1) Access to global balance sheet of companies

2) Same top notch security as the parent company

3) Chance to leverage the benefits of broad expertise of the parent company

4) Since the parent company is responsible for the liabilities of the branch, there is a reduced

chance of default

Mr. Agarwal discussed that there is a strong need

to separate regulations for Reinsurance

companies in India. The “home regulations” are

more important than the “host regulations” and

the current collateral requirement scenario in the

sector should be revamped. He referred to the

way China allowed its domestic insurance

companies to invest in 45 countries, while Indian

insurance companies are not allowed to invest

outside India.

He concluded by saying that India’s insurance

vision should encapsulate two critical points

which are:

1) Constitution of a modern and transparent framework, coherent with the global Re insurance

platform

2) Importance of the regulatory part wherein minimum regulation is made available with

maximum supervision

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Theme 3: Policy Changes required by GOI for Global Financial Hub - Foreign Bank Perspective

Mr. Asit Bhatia - Managing Director and Co-Head of Global Corporate and

Investment Banking, Bank of America, N.A.

Mr. Asit Bhatia indicated that London, New York etc. being the

headquarters of Global financial institutions are amongst the major

global financial hubs currently and their strength is the market entry

that they provide. He referred to the recent survey on upcoming

financial hubs, according to which Singapore and Hong Kong emerged

as the potential candidates; whereas India did not feature in the list

although India has the potential of becoming one. India has a large

domestic market, skilled talent pool, favorable time-pools and an

efficient equity market but India needs liquid and efficient debt market,

large currency market and an efficient insurance and re-insurance

market.

He further mentioned the factors that are pivotal in transforming India

into a successful financial hub. They are:-

a) The Regulatory Environment needs to be balanced to make the market safe and attractive.

Regulators should look at improving the capabilities of domestic financial system, global

competitiveness and risks involved in case of financial losses. India should look at failures of

financial firms positively

b) Laws need to be fairly predictable and consistent. He implied that in order to attract foreign

investors towards India, there should be Consistent Economic Growth and Consistent Policies.

c) Taxes, both at corporate and personal level, need to be in a balanced form to attract foreign

investors

d) Openness to foreign entries is an important aspect for any financial hub

Mr. Bhatia emphasized that we need to learn and adopt the best practices from other upcoming

financial hubs like Political and Social Stability, Sound Legal System, Responsive Government, Favorable

Tax regime, Low regulatory Cost and an Efficient and Modern Infrastructure in order to become a global

financial hub.

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Summing up and Vote of Thanks: Dr. Hasmukh Adhia, IAS, Additional Chief Secretary, Finance, Government of Gujarat

Dr. Adhia thanked all the speakers and the participants for being a part of the seminar. He mentioned

the following points that need to be focused

upon in order to make India a Global Financial

Hub:

a) Regulatory Environment in the country

needs to be consistent and stable in

order to attract investors

b) The Central and State governments

need to maintain a fiscal discipline in

order to bring stability in the economy

c) Government policies need to stay for a

longer period instead of changing in

small periods of time, particularly with

respect to the debt market.

d) India needs to have robust and efficient infrastructure including Telecom, IT infrastructure and

skilled manpower.

All this will not only help the domestic and foreign financial players to enter India, but will also help in

bringing back the financial services which are offshored by Indian companies. He thanked the industry

representatives for sharing their views in the conference and was hopeful that these recommendations

will be helpful in making India a Global Financial Hub.

Findings:

Purchases by Indian households and firms of International Financial Services will be nearly $50

billion by 2015 and could exceed $120 billion by 2025.

There is a need to develop a Global Financial Hub in India with state of the art infrastructure

facilities.

A successful Financial Hub in India would require pragmatic rules and regulations for hassle free

operations of International financial services.

Special status may be provided to such centers in order to enable them to provide platform for

development of international financial services in India.

The draft rules prepared for operationalizing International Financial Services (IFS) in SEZ should

be approved at the earliest in order to enable large scale international operations of Indian and

foreign firms from such centers.

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Companies operating from International Financial Services Centre (IFSC) should be given

flexibility for their operations which will help them to compete with other international financial

institutions.

Development of IFSC in India has a potential to create 7 million jobs in India.

Government of Gujarat’s initiative of developing GIFT City as India’s first Global Financial Hub

with 1 million jobs would go a long way in establishing International Financial Services business

in India.