In India, both Investment and Commercial Banking have become highly sophisticated, competitive and operationally complex. While intrinsically the businesses are different, there are some common elements across both. Today, both of these sectors encompass complex products, thrive on international business and partnerships, operate with global scales and are subject to an elevated regulatory framework, shared Nina Nagpal, Director, Board of Bank of Baroda & Independent Advisor, in an exclusive interaction with Srajan Agarwal of Elets News Network (ENN).
With your extensive experience in governance, what would you say are the biggest challenges and opportunities for corporate governance in the corporate and financial sector today?
The Corporate sector in general and banking and financial services in particular have transformed over the past decade and a half. First, we live in the times of a deep technology wave that is sweeping us where innovations are being rolled out at an uncanny pace. Second, an increasingly sophisticated communication technology has allowed for innovations & tech developments to travel at amasing speeds across the world.
This allows for high-scale operations. Consequent to one and two above, corporations and banks have become increasingly complex. Logically corporate governance needs to be both elevated and knowledge-driven. The complexity of products and the sophistication of technology including the on-boarding of AI make governance both challenging and hence call for a deeper engagement.
Your experience spans both investment and commercial banking. How have we fared across both and what are some common principles that apply across them?
In India, both Investment and Commercial Banking have become highly sophisticated, competitive and operationally complex. While intrinsically the businesses are different, there are some common elements across both. Today, both of these sectors encompass complex products, thrive on international business and partnerships, operate with global scales and are subject to an elevated regulatory framework.
In the commercial banking space, three of the Indian banks have a place in the top fifty Asian banks in terms of asset book size. One of the Indian banks ranks eighth in a list of the world’s top ten in terms of market capitalisation. Indian commercial banks have deployed technology and product innovation backed by good governance to secure the league-table positions that they occupy.
Likewise in the capital markets domain, what’s emerged is startling. The Economist Magazine calls it “ the largest-ever experiment in participatory capitalism”. In the first three quarters of this year, India’s 258 IPOs accounted for 30% of the global total by number and 12% of the amount of money raised.
The scaling up of the capital markets in great part has been supported by good governance from the management and the Boards alike.
In your view, how can financial institutions better align with regulatory requirements with innovation and growth?
The references I made to the scales banks and capital market institutions have achieved, are hinged on technology, innovation in products and processes and governance. However, it is equally important to acknowledge the role of regulation and regulatory framework. It provides the necessary guard rails for operations and growth. In fact, beyond the guardrails, the Indian regulators provide the stimulus for innovation through partnerships with fintech, and technology firms and offering Sandboxes for testing and rolling out new applications.
With your extensive experience in Board positions and corporate governance, could you elaborate on the key challenges and opportunities that financial institutions are currently facing in terms of governance? Also, how has the landscape of corporate governance in the financial sector evolved over the years?
Corporate governance is a two-step process. First, the role of the management team is critical. The Board comes next. Its mandate is to focus on strategy, Policies and oversight over the direction that the management is steering the company in. The next level is the regulators who supervise the regulated entities and reserve the right to opine on governance apart from other matters of regulation.
Having been part of Boards of regulated entities, I believe that we are easily one of the world’s top-quality regulatory institutions and regulatory standards. The regulations have also kept pace with the growth, evolution and complexity of the financial and banking services.
and AI are intimately intertwined with processes that were earlier either human and/ or automated. The international operations of Indian institutions lend another degree of complexity to the governance and regulatory standpoint.
With your experience as a TEDx speaker and a thought leader on industry trends, what emerging governance trends do you believe will shape the future of banking and finance in the next decade?
Technology remains the centrepiece of all that we do in today’s financial services space. The new and emerging partners are AI and Generative AI. This is a wave that is upon us and it will continue to steadily become an intrinsic part of all that we are and all that we do. It will have consequences on the future of our businesses. Some of these will be intended and others unintended.
It is hard to predict the pace of AI adoption but what is clear is that it will change the way we do business injecting deep efficiencies and speed in our processes. It is important to remember at all times that speed is good but a little bit of friction in the process always helps to bring in thought and prudence in the processes. The point is that human engagement at all times must be the goal.
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