Gearing for growth

Standard Chartered Bank CEO Anirvan Ghosh Dastidar talks to Daily FT about investments, projected growth and Budget opportunities in the first media interview since he assumed office:

By Uditha Jayasinghe

Q: What do you think of the Budget?

A: It is a progressive Budget that has received an enthusiastic response from the private sector. It includes some timely reforms such as the taxes and foreign exchange regulation relaxation, which will be a boon to foreign investors. It is the right step by the government and sends a strong message about their intentions to the rest of the world. I meet many corporate heads who are very upbeat as a result of the Budget and it is now time for us to make the best of it.

Q: What risks does Sri Lanka face?

A: Well the biggest challenge the Budget has to deal with is whether or not the current policies can generate the necessary income to bridge the Budget deficit. The VAT reduction for banks can result in fantastic profitability but we need to figure out mechanisms to assist all stakeholders. Similarly debit tax reductions will result in greater usage of accounts for transactions but I think that there will be little impact on capital markets.

Q: The government wants banks to engage in more long term lending. What is your stance regarding this point?

A: The Standard Chartered Bank is already aligned with certain segments and we have indentified the sectors that we are interested in. We respect the regulator and understand the need of what is being stated but at the same time our platform is different. Our bank believes in providing a local platform for our foreign clients to operate on and we are already involved in some of the massive development projects around the country. For example we are involved in the Hambantota Port as the Chinese company is a client. The Treasury Secretary is right to want long term lending to spur investment, especially for small business and we are well aware of this. We have already established a Small and Medium Enterprises (SMEs) business and are extremely bullish about its prospects. We are keen on doing more business with this sector.

Q: What are your future plans? Do they include expansion?

A: We are definitely looking to expand. It’s just a matter of time. We want to reposition ourselves first and are considering several changes. The first will be consolidation of our offices so that they have more prominence within the city limits; this includes relocating the Pettah branch as well. We want to increase our offices outside Colombo and will be launching plans for that in 2011. The bank is very keen to ride the wave of post-war boom and we see great potential both in and out of Colombo.

Q: What are your growth prospects for the New Year?

A: The SCB in an independent review has noted that Sri Lanka’s GDP will be around 7%, which is slightly less than the amount projected by the Central Bank. However 7%-8% growth is impressive for any economy. However the risks are there, yet there is room for retail lending and local corporates are doing well, we are also interested in doing business with them. There is infrastructure linked lending with the Asian Development Bank (ADB) and the strength of our global clients. The growing standard of living and spending middle class can provide a platform for consumerism that could spur inflation so this statistic needs to be watched.

Q: What products are you providing SMEs?

A: We deal with segments within SMEs. We work with SMEs in the fisheries sector, in Colombo and supply chain linked participation. We provide trade, treasury and mortgage linked products. The bank is also interested in identifying new sectors for involvement.     

Q: The government has outlined plans to become a financial hub. What are your thoughts?

A: I think it is a very good idea. Local banks will have to learn to compete at international levels, right now there are too many small players and they will have to consolidate if they want to achieve presence at a global level. Sophisticated capital markets will have to be established and ease of doing business needs to be improved. Much is being done in this regard but other factors have to be upgraded as well. The Colombo Stock Exchange (CSE) needs to be made retail with more small investors and encourage global players to come into Sri Lanka.

Q: There is a school of thought that the hedging issue would hamper the establishment of the financial hub. What is your opinion?

A: There are so many positive things happening in Sri Lanka at the moment. So the positives outweigh the negatives and they should not be blurred by one issue.

Q: You were previously the Regional Head of Consumer Banking for Eastern India. What are the differences in consumer trends between Sri Lanka and India?

A: India has a massive middle class that has created a huge internal market and it is this endless spate of consumption that keeps the economy ticking. Earlier population was considered a curse but now it is being viewed as a blessing and it is this that saved countries like India and China from the global financial crisis. It is also why so many companies are trying to enter India. When you have such a massive internal market you don’t have to worry. Companies have to challenge domestic consumption and reduce the trade deficit. More exports are needed for this but Sri Lanka has several sectors that it can tap into. One is agriculture. Sri Lanka can become the food basket to the world. This country needs at least one large mall. When you go to the supermarkets you can see people buying; so there is a market for it – a mall with a selection of upmarket brands.

Q: What are SCB’s plans in the long term?

A: We are clear about our intention. SCB is here for the long run. We respect the regulator and are open for business. We believe in providing a local platform for our international clients while facilitating business with local corporates. We have achieved record profits for the 7th consecutive year and remain a well capitalised bank in fantastic shape.