New Delhi, The Institute for Financial Management & Research (IFMR), the Chennai-based business school with a principal remit on finance and consultancy expertise for industry, offers training for people at a very advanced level.
Started in the 1970s and sponsored by ICICI, the House of Kotharis and other major industrial groups, IFMR’s Dean Academic Affairs, Mr R. Chandrasekar, was in the Capital for a national seminar recently. An MBA from the University of Chicago and a post-graduate from Delhi School of Economics, Mr Chandrasekar has wide exposure in both academic and banking segments.
Prior to joining IFMR, he worked as a financial economist at the Chicago Board of Trade in the areas of Options on T-Bond Furtures, Municipal Bonds and T-Bonds futures contracts. He was also the supervisor of the trading room at the Tokyo and London offices helping to set up and run operations there. He also was the President of Fidelity Finance for a year.
He spoke to Business Line on issues that have a bearing on the financial market in general and the need to price and assess risks of various financial instruments by banks and other financial institutions as also by investors and the public. Excerpts from the interview:
On IFMR’s academic courses…
The institute offers a course on ‘financial engineering’ as markets have become much more sophisticated. We are going to train students on creating financial instruments, valuing them and measuring risks. So far, we have trained 10 people as it is a very niche course.
Next year, we are starting a programme on development and sustainable finance. If somebody wants to work for a micro-finance institution or rural non-banking finance company or non-governmental organisation, it is not enough just to have good intentions but also an ability to learn and understand all aspects of these institutions.
IMFR plans to expand its existing infrastructure and focus on research and training.
On the Indian banking industry…
The banking industry is in fairly good shape. But by no means, it is perfect. Banks have still a long way to go in terms of assessing credit risk, pricing risk and managing credit exposure. In some cases, there are legal limitations and in some cases capacity limitations and banks recognise these shortcomings and are making changes.
Come 2009, there will be a vast increase in competition and people are preparing themselves for that. The question is are we fully there and the answer is we are moving in that direction.
On financial inclusion…
There are a lot of people who need access to finance and are not getting it. We need to re-think on this seriously as micro-finance provides only part of the answer. Public sector banks have huge outreach in rural areas but the branch manager does not know the customer or have knowledge of local customers and conditions; so outsource this job to somebody so as to leverage that knowledge.
Once you understand that, you restructure the loan repayment to sync with harvest cycle.
You need to find ways to quantify weather-based or health-based risks being borne by the farmers and develop instruments which would get around these risks.
As a research institute, IFMR is trying to do some work in this area by getting primary data to get a better understanding about these risks and how they can be priced.
On bond market…
One big change which has already taken place is the Government issuing bonds on a market-determined interest. Development of the corporate bond market would happen slowly.
Everybody should have equal access to Government securities. Foreigners should also be able to buy G-secs. It would automatically broaden market access and deepen the market.
People should be able to buy G-Secs freely and once this happens, the corporate bond market would develop, provided the settlement and legal infrastructure are in place. One area where there is a question mark is securitisation instruments.
On financial market turbulence…
If macro-economic fundamentals are sound, there is no possibility of huge amount of foreign money going out of the country.
As long as monetary and fiscal policy is within sensible limits, I don’t think there is much danger of rapid outflow of money from the country and the supervisory bodies are doing their job well.
