Political India: Engaging America

From The Hindu

CHENNAI: Front office functions will now be included within the gamut of services to be housed in the financial city planned here, sources close to the project authority have said.

With recent behind-the-scenes discussions suggesting it will be more than a back office hub, the financial services being considered for inclusion are a commodity exchange, a stock exchange, asset management, risk assessment services, banking services and insurance and reinsurance services.

Speaking to The Hindu, a State Industries Department senior official said: “Mumbai is a financial centre, Gujarat has announced GIFT, the Gujarat International Financial Tech-City, and Hyderabad is also making similar plans. So where do we position ourselves?”

While clearly ruling out direct competition with Mumbai as a financial hub, the official pointed out that the Chennai financial city would meet companies’ need for additional facilities given that concentrating major resources in one place was no longer an option for large financial institutions.

“Your nerve centre cannot be in only one place; this is basically risk management. So we would try to project the financial city essentially in terms of the following concept: whatever Mumbai can offer, we will also be able to offer,” the official said.

Attracting talent

However, to effectively provide an alternative to sophisticated financial hubs such as Mumbai by attracting world class talent, education services offered in Tamil Nadu would have to be ramped up.

The Ministry official explained: “While we have a strong presence in terms of number of Chartered Accountants, in some other areas we really need to improve. For example we need better management institutions, we need to have better risk assessing capabilities built into the system. In areas such as risk assessment, risk allocation and risk management there will be, in parallel, a need to improve the educational set-up as well.”

Among the options being considered is the possibility of bringing in business schools of repute through a tie-up with the University of Madras or Anna University. “Some of these universities can sign an MoU for creating such institutions. We don’t really need to bring an institution here if you can simply provide limited courses of three to six months for CAs and MBAs, tailored to a specific kind of role,” the official said.

While risk diversification would be an important differentiating factor for the Chennai financial city, cost competitiveness and overall product quality would be important for attracting global players.

There may be certain services for which it is possible to be equally effective whether you are in Mumbai or in Chennai and some things are location-neutral, the official explained.

“Suppose that you are in a particular niche where traders are important. You can have all the facilities, but if the traders are all elsewhere, then it will not click. That is the thinking that needs to go into our initial planning on what are the two or three things that we are going to do first,” he said.

However, in some areas the presence of traders can be neutralised by technology: “Today even in the stock exchanges technology can actually neutralise the presence of a trader and everybody is only sitting on his own terminal, isn’t he?”

Knowledge economy

The move to include front office functions and systemic improvements in education and healthcare services reflects a “bigger issue”: Tamil Nadu would be making a big leap in establishing the financial city, having already achieved a similar goal in the IT space. In the announcement made by the Deputy Chief Minister earlier, there was also a mention of an information and media city.

“The point we are trying to make is that Tamil Nadu should get into the knowledge-based economy more. We should stake a claim for everything that is based on that,” the Ministry official said.

Labels: asset management, banking, Chennai, commodity exchange, financial city, front office, GIFT, Gujarat, insurance, knowledge-based economy, Mumbai, risk management, stock exchange

From The Hindu

CHENNAI: Financial institutions (FIs) with operations in Tamil Nadu have welcomed the idea of creating a financial city near Chennai. Senior executives in leading companies saying the policy is a “commendable and thoughtful measure” and a “very positive outcome” for the State.

The plan was unveiled recently by Deputy Chief Minister M.K. Stalin. Subsequently, Industries Department officials confirmed that the initial phases of the project would focus on back office operations.

“The nexus between the prototypical Tamilian and the financial services industry is a strong one”, says Gopal Srinivasan, Chairman of TVS Capital Funds. The State’s workforce has an inherent propensity for hard work and intelligence and there is a sizeable pool of professionals such as chartered accountants.

“The financial city will position Tamil Nadu more competitively for attracting investment relative to other States,” says Sreeram Iyer, Chief Operating Officer of Standard Chartered Bank. SCB, working with Scope International, currently has back office operations in the State employing around 7,000 people.

Other banks with back office operations in Tamil Nadu include ABN Amro, BNP Paribas and the World Bank.

Lakshmi Narayanan, Vice-Chairman of Cognizant Technology Solutions, says given the imperatives of the global financial crisis and the requirements of the Basle II Accord, “The current focus is now on enterprise risk management. This was not given as much attention earlier. Additionally, as more regulation is rolled out across countries, there will be a greater need for reports generated by companies to meet regulatory requirements. This will lead to an emphasis on back office functions.”

However, there are several key attributes that the financial city project will have to possess in order to attain long-term success. Industry leaders emphasise the “ecosystem” architecture of the city, which will have to go beyond mere physical infrastructure provision to develop “soft” infrastructure. This could imply “attracting talent from other financial centres such as Mumbai.”

In particular, Mr. Iyer suggests: “One important step in attracting global talent, high up in the value chain may be getting more international schools for children.” Mr. Narayanan too emphasises technical and management-related education, building on existing institutions such as the Institute for Financial Management and Research (IFMR), the MBA programme at IIT-Madras and the Great Lakes Institute of Management.

Additionally “industry bodies will have to be created for the banking and insurance sectors,” Mr. Narayanan points out. Just as the National Association of Software and Services Companies (NASSCOM) played a key role in attracting foreign investment to the IT sector, an industry body for finance will be required to bring in funds to the financial city. While CII, FICCI and ASSOCHAM have financial arms, this is only one arm among the several, he explains.

At a broad level the financial city will have to be inclusive rather than exclusive, allowing banks in other regions, such as Punjab National Bank, access to its facilities. Strong communication links and partnership arrangements with other financial centres such as Mumbai, Singapore and Shanghai will be vital.

Ultimately it can even serve as “an opportunity for urban renewal,” Mr. Srinivasan argues. It can be viewed as a means to take forward the larger macro goals of “urban de-densification, re-purposing of land and dealing with the challenge of intra-city congestion.”

Labels: ABN Amro, Cognizant Technology Solutions, financial city, IFMR, IIT, Mumbai, Shanghai, Singapore, Standard Chartered Bank, TVS, World Bank