India

Commentary

Calls on India are always well attended: there is never a shortage of items to discuss. It is already a very large market, and it continues to grow – so all international companies are motivated to manage its many complexities. 

Complexity is something at which India excels: the regulations are many, varied, and never easy to navigate. It can be difficult to know exactly what they are: as often happens, we spent a lot of time trying to establish what is, and what is not, allowed. At the same time, the country has come a long way. Many things which used to be forbidden are now allowed: cash can be brought into and out of the country with relative ease, though not without red tape. The authorities are relatively flexible and business friendly. India is in the vanguard of efforts to move away from cash for retail transactions: this may be mostly for tax reasons, but it reflects the country’s leading position in technology.

At the same time, it remains a very large country, with significant regional variations, including language, climate, culture and religion – so differences will continue to exist. Our conversation covered the following points:

• The economy continues to perform well, though competition is fierce – and, in some areas, India continues to favour national champions.
• Operations: most peers had different legal entities in India involved in different activities: manufacturing, R&D, shared service centres, marketing, etc. Intercompany lending within the country, while permitted, can be complicated.
• Onshore versus centralised treasury: many MNCs have local treasury teams, due to the regulations and complexity. This is beginning to change: several participants are starting to bring India into their centralised structures. 
• Similarly, most peers are only using international banks in the country, and shutting down relationships with local banks. One participant attributed this in part to a regulatory requirement to link lending activity to transactional business – especially as the foreign banks can now provide complete services.
• Another peer

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Commentary

The way treasurers manage banking relations provides a key insight into how they approach their job. This session was no exception – and we had the additional benefit of input from senior banker in Asia and Advisory Board member John Laurens, who shared his view from the other side of the fence.

• Nearly everyone had the same goal: try to get the most efficient banking structure.
• This nearly always involves a general preference for dealing with core international relationship banks over having many local relationships
• However, one participant commented that local banks in Asia often have excellent technology and services – but it is difficult to get HQ to agree to go with them
• In any case, there are many situations where local banks are still required, to support tax payments or local payment systems. China, India, Korea and Japan were the countries where this was most frequent.
• In awarding business to banks, most companies tend to give a preference to the institutions who participate in credit facilities. Exceptions were made when justified by a specific service, but this could become an issue when credit needs increased.
• Several participants have either recently restructured their banking relationships, or are currently doing so. Comments:
  • It is very important to get the local team on board. They will usually accept the outcome and help if they own the decision, and can see clear benefits.
  • The RFP process is useful, but it is important to carefully check the responses. One participant found that banks often tried to sell capabilities they did not yet have – it is important to focus on what they can deliver today. They also found it was beneficial to use...please sign in to continue reading

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