‘India is one among the few markets to be in a sweet spot’

The West might soon be in a recession. So what do you foresee for the Asian markets?

Standard Chartered is present in 59 countries, of which Asia accounts for around 70% of the group’s income and profit. While we are headquartered in the UK, Asia is pretty much at the heart of our business, and we are in 21 markets in Asia. The way I look at it, there are a few major economic blocs—Europe is a big one; the US is big, and Asia and Latin America are big as well. Europe will probably be going through a tougher patch next year. The US, because of its monetary policy tightening, will probably see a slowing of growth. But I still think Asia will remain a strong economic region relatively.

Does the economic situation in India inspire confidence?

India is definitely the one leading the South Asian region. There is Asean and China as well. These three are very potent engines, individually and in a connected way. In the last few decades, the world has been operating in the model of East manufacturing for the consumption of the West. Going forward, increasingly, it will be the East manufacturing for consumption of the East, and that change is going to be very important. For India, I will say the stars are very aligned. It is one of the few markets to be in a sweet spot. It is doing well economically but is yet to reap its demographic dividend entirely. When India’s average gross domestic product (GDP) reaches a certain middle-income stage, consumption ramp-up will be very fast. We have not even reached that point yet.

What are the areas of focus for the bank here?

There are lots of focus areas because India has no shortage of growth. India is a powerhouse that people will be investing in; it will be a China-plus-one strategy and a great place to do diversification. With the government focusing on production-linked incentive (PLI) schemes, hopefully, we will be getting the whole sector going, and there is a lot we can do to help redistribute supply chains.

Are rising interest rates impacting Standard Chartered Bank?

For a bank like us with strong liabilities rising rates are good. However, too-fast, too-sharp hikes will have a bearing on our clients’ ability to repay. We feel a moderated interest rate rise is a good thing, but if it is too sharp, we should make sure the clients are also liquid. We are somewhat in a sweet spot owing to the rising margins, but there is a lag effect on economic growth and potential loan-provisioning requirements.

Is India at risk of flight of capital in the present scenario?

All I can say is that on a relative basis, India is better than many. India is not at a high risk of flight of capital compared to many other markets. The question is the flight of capital to where? India has always had, on a relative basis, a valuation that is on the high side. While part of it is captive, part of it is all-around growth expectations. I do not think the growth expectations are unjustified.

What is your take on underwriting new-age companies?

Well, banks are learning. Bankers are always taught to look at spreadsheets, historical cash flows and balance sheets, and profit and loss, among others. The new companies have none, and so we need to adapt. Obviously, we must look into the underlying business and the prospective model and see whether you trust an entrepreneur. We do sandboxes and carve out an X amount, provided that it is within or around the risk appetite. Not all of them will succeed, but if you bank on the success stories early enough, they will remember you.

What are the near-term risks in China and Sri Lanka?

The China commercial real estate (CRE) risk is an industry issue that is still ongoing and is not completely resolved. In perspective, our exposure to China CRE represents around 5% of our total China exposure. Not all are bad, but for those who are going through a challenge, we have to help them. Sri Lanka is an example of a nation dependent on the availability of foreign reserves. When you have a dollar debt, you are dependent on tourism and have to buy oil and, therefore, need foreign currency. Sovereign risks during this type of high dollar rate, and commodity prices, do pose issues that might need multilateral support to tide over.

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