India Needs to Take Action on Rupee: StanChart Asia CEO
The weak Indian rupee has impacted earnings at Standard Chartered Bank and India needs to exercise some “fiscal control” with regards to the currency, Jaspal Bindra, CEO Asia for Standard Chartered, said on Thursday.
The Asia-focused British lender on Wednesday said its first-half pre-tax profitrose 9 percent to $3.95 billion compared to the same period a year ago. But a slowdown in key markets such as India hurt growth in wealth management income.
“Clearly we have slowed in India, in line with the drop in GDP growth we have seen in that market. But the large hit that has come, is from the exchange, which clearly needs some correction purely from fiscal control in that country,” Bindra told CNBC Asia’s “Squawk Box.”
India’s currency, the rupee, hit record lows in late June at about 57.32 to the U.S. dollar, driven down by the country’s stubbornly high inflation rate, slowing economic growth and concerns about a lack of progress on fiscal reforms.
Bindra said there are some positive signs such as the appointment earlier this week of Palaniappan Chidambaram as India’s new finance minister. Chidambaram is viewed as a market-friendly reformer and was finance minister in the mid-1990s, when he carried through a series of reforms that were viewed as positive for spurring India’s rapid economic growth at that time.
“We are encouraged that the oil price reduction and the change in the finance minister might be the watershed that is required. Having said that we are very confident about the medium-term prospects for India and we are increasing our investment there in branches, technology and products,” Bindra said.
India, Asia’s third-largest economy, has been in the spotlight this week after massive power outages highlight the country’s poor infrastructure and puts its ambitions as a global economic power at risk.
Referring to how Standard Chartered was competing against its competitors in the region, Bindra said the bank was benefiting as European banks scale back on business in Asia.
“Generally on the competition, particularly the European competition, which has to deleverage, we are winning market share on that count,” he said.
“More importantly, … we are the only major bank that has been upgraded by all three rating agencies since the financial crisis, we’ve been able to attract very good talent from our competitors,” he added.
- By CNBC's Dhara Ranasinghe