Explained: Why China could be K V Kamath’s biggest challenge

Written by Shaji Vikraman | New Delhi | Updated: May 12, 2015 6:32 am
K V Kamath, BRICS Bank, Shanghai BRICS Bank, BRICS Bank K V Kamath, China BRICS Bank K V Kamath, indian express explained, explained Indian Express, india news, express news, business news It is that ability to think laterally and to execute those plans, to build organisations and institutions, that mark K V Kamath out as he sets off on perhaps the last leg of his remarkable professional journey.

It is important that K V Kamath succeeds at BRICS Bank in Shanghai — it will be evidence of the ability of an Indian leader to build a global institution

Some time in 1985-86 — in the days of administered rates and the notorious licence raj regime, K V Kamath, then a young officer in the Development Financial Institution ICICI, made a presentation to Narayan Vaghul, the legendary head of the institution.

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In his presentation, Kamath, who had been moved from leasing to the planning department, then a non-glamorous portfolio, concluded that the Development Financial Institution or DFI model of lending to projects approved by the government was doomed to fail in not too far a future. Vaghul, who had taken an early, instinctive decision that Kamath would be his successor, concurred — sensing that being in a business where the lender seldom gained on the upside when it came to successful projects but had to take the downside on losing projects, was not going to pay in the medium to long term.That was when the institution took a key turn.

Read: KV Kamath appointed the first president at $100-bn Brics Bank

Long after he had made that presentation, Kamath moved to Manila to join the multilateral lender Asian Development Bank. He returned in 1996, after Vaghul persuaded him to lead ICICI and help make the transition from a DFI or a wholesale bank to a retail bank, now India’s second largest bank.

India’s other DFIs didn’t see the writing on the wall as clearly as he did then. That lack of foresight is now reflected in their financials and, in many cases, their bleak future.

And it is that ability to think laterally and to execute those plans, to build organisations and institutions, that mark Kamath out as he sets off on perhaps the last leg of his remarkable professional journey — to possibly deliver the final, glowing seal on his legacy.

There are many things going for him. A political leadership that appears to put a lot of faith in him, opting for him ahead of seasoned former policymakers and top bankers; a great connect with corporate India and India’s policy establishment over the last three decades; a good feel of how the political economy works; experience of having worked in a multilateral lending institution and raising capital from the local and global capital markets; and having built a top retail bank after weathering the storm of the global financial crisis in 2008.

All these strengths also draw on Kamath’s formidable diplomatic skills — which he will need to tap into often in his new assignment. It probably comes from his nuanced reading of the economy, and by the fact that he has engaged with successive governments over the last few decades on policy formulation. And not just in the financial sector.

Not many are aware that the famous New Telecom Policy of 1999 which marked a shift to a licence fee regime based on revenue share — and which is now recognised as a game changer in India’s economic history by ushering in the explosion of  telecom — had his imprint too, even though it was driven by Atal Bihari Vajpayee’s PMO. It is that enduring link with public policy that may also have tilted the balance when his name was being considered, even though there were people who reckoned that a younger candidate should have been chosen. (Kamath is 67.)

That choice will be tested now in the new BRICS Bank which Kamath has to build as its president. That’s because China, one of the five stakeholders in the bank which will have a reserve currency pool of $ 100 billion to mitigate any short term liquidity pressures faced by the grouping of BRIC nations, has set its sights more on the Asian Infrastructure Investment Bank, which has had countries like Germany, the UK and Australia lining up to join. This bank, also based in China, is seeking to invest in a range of infrastructure projects in the region, as Beijing attempts to boost its economic influence further — and challenge the old order dictated by multilateral lenders such as the IMF and World Bank.  How the BRICS Bank squares up with this and  PM Narendra Modi’s idea of  a lender that focusses on next generation infrastructure gaps  and new models of financing and governance, will be Kamath’s challenge.

For sure KVK, as he is called by his peers, has the experience of having built a bank and raised capital. More importantly, one of his legacies has been that of  building a pipeline of leaders. Many of  the country’s younger leaders in the financial sector were groomed in the institution which he headed for long.

In Shanghai, Kamath may also have to draw on his experience of  firefighting, which he has done in the past — in refereeing the famous split of the Ambani brothers, or in guiding Infosys at a critical juncture when it appeared to be losing its way.

It is important that Kamath succeed — as that would be a reflection of the ability of an Indian leader to build what could potentially be a globally ranking institution or bank. And to also justify the choice of India’s political leadership which, cutting across parties, has often surprised when it comes to making choices for key assignments.

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