Signing off as Deputy Governor of RBI, Gopinath tells Shobhana Subramanian how she came to join the central bank instead of Central Bank
Her nickname in RBI is ‘Simply Great’. After all, it was she who held the Indian economy together when Lehman Brothers collapsed in September 2008, making sure Indian banks weren’t cash-strapped. Even earlier, way back in 1991, she helped handle a foreign currency shortage by crystallising the foreign currency liabilities of IOC so that the oil major could honour its payments. If RBI is held in high esteem by governments across the world for having regulated with prudence and pragmatism, much of the credit belongs to Shyamala Gopinath. Indeed, at the end of an illustrious career, one is glad she signed on with the central bank and not Central Bank, from whom she had an offer. As all her colleagues will tell you, the mild-mannered Gopinath is so generous she would make you believe you’re the one who came up with the bright idea, even though in reality the solution would be hers and you might not have a clue about what you’re saying. Having spent a lifetime at RBI, the last few years as deputy governor, Gopinath tells FE she wants to remain gainfully employed, perhaps working with corporates on governance issues. And also learn some classical and devotional music, which she enjoys so much. It’s a Sunday morning and we’re at the RBI guesthouse on Nepean Sea Road in south Mumbai. Although it’s her last Sunday as a deputy governor with RBI, the workaholic in her doesn’t mind that she has a packed schedule. In any case, she says most Sundays are spent catching up with work or reading up on subjects related to what she’s working on, with little time really left to do the household chores. If she does find some time on her hands, she picks up a book; right now she’s engrossed in Ori Brafman’s Sway: The Irresistible Pull of Irrational Behavior. She tells me of how The Washington Post carried out an experiment to judge whether people really understood and recognised talent or whether it was more herd mentality and snob value. The Post asked musician Joshua to play on a Stradivarius in a New York subway but although the music was sublime, he was largely ignored and some even threw a few coins his way. When the same musician played in Boston, tickets were sold out at $100 each. It’s understandable that Gopinath would empathise with the story because she’s as simple it gets, wearing her achievements ever so lightly. We’re served some light fluffy upma and some poha. Gopinath tells me she’s a breakfast person, making sure that she gets something to eat in the mornings before rushing off to work, though she doesn’t really get to spend too much time in the kitchen. Of course, when her daughters are home from the US, she makes sure they get some of the traditional south Indian fare that they miss. Gopinath confides that, of late, her daughters have been complaining that her bisi bele bhath isn’t quite what it used to be. “My daughter says I’ve forgotten how to cook. I must have messed up a little bit.” Although from Karnataka, Gopinath is pretty much a Mumbaikar, having gone to Fatima High School in Ghatkopar, recalling how the institution was just being set up and how classes were added so that she pretty much grew up with the school. The family moved back to Bangalore after a couple of years in Jaipur where Gopinath pursued a degree in commerce. “You could call it incidental or accidental that I studied commerce. The way it happened was that I had to join the university and my father went to fill out the forms. The combinations of subjects available were geography, economics and commerce or history, economics and politics. My father thought I didn’t like history or politics so he enrolled me for commerce, though actually I had wanted to do science.” Gopinath recalls how there were hardly any girls in the commerce stream. “There were four or five sections and hundreds of boys and we were just four girls.” However, she was interested in banking and had been selected by both Bank of Baroda and Central Bank of India. But her father insisted she take the RBI entrance examination, which, in those days, was held in Chennai. “In those days, the application fee was R50 and I thought it was high. I felt it would be too much of expense because someone would have to accompany me to Chennai.” But her father, who she says was “overawed by RBI”, persuaded her to take the examination that she topped. Gopinath said she didn’t even know that she belonged to the first batch of Grade-B officers and what it meant to be one. “RBI at the time was only recruiting Grade-A officers. She recalls a letter from Bank of Baroda when she didn’t take up their offer. “Please think twice. Why do you want to join RBI? There’s hardly any expansion there while we are going to open hundreds of branches.” Gopinath says she doesn’t really regret joining RBI. But now that she’s no longer going to be a central banker, would she like to take some pace off her schedule? “Unfortunately I didn’t learn classical music, that’s something I must find time for,” she says, adding that her Mumbai upbringing has made her fond of film music and ghazals. But for someone who works 24/7, it can’t be all leisure. “I’m committed to regulatory practices and want to continue learning and applying what I have learnt, so I would not mind being involved with corporates and helping them evolve governance.” Since she has been on the board of SBI, I ask whether she was somewhat disappointed with its governance. Gopinath points out that it is hard to understand public sector governance because while SBI is listed, the governance structure is in the SBI Act. That means the role of the shareholders is not what it is in the case of other listed companies. Moreover, it’s not the board but the government that makes the appointments. “I’m not saying it hasn’t worked but in the case of private sector banks we have tried to separate the chairman from the managing directors whereas in PSBs we have CMDs. We have tried to understand this difference but perhaps because the government is the owner there are certain boundaries within which the board functions, so may be one doesn’t need this kind of separation. But we do need to think about this,” she says. Wasn’t RBI miffed with the SBI management because it took some decisions without the knowledge of the board? Gopinath downplays the issue. “During the crisis, corporates needed money and we were not upset with the decisions. There was just the one matter relating to the Tata bonds where they had interpreted the circular differently but it was an off-balance-sheet transaction, not a loan.” Will the holding company structure make it easier for RBI to regulate corporates that may run banks? Gopinath believes that one lesson she learnt from the financial crisis is that no model came out as being the best model and the crisis was actually model-neutral. She concludes, therefore, that eventually the success of any model depends on the regulatory environment and the intensity of supervision. “What the holding company does is encourage transparency and makes the structure less complex so that one clearly knows the inter-connections and liabilities,” she explains, adding that “whether the arm’s length piece can be dealt with better, that is another question”. Is India far away from full convertibility on the capital account? “Of late, I’ve been wondering what exactly is full convertibility and I would like to see a country where there is full convertibility on the capital account,” says Gopinath, who points out that the current framework has been liberalised to the extent needed for the economy to grow with stability. “Corporates today have a fair amount of freedom but perhaps not individuals. That’s because remittances tend to be pro-cyclical and the pro-cyclicality gets accentuated when individuals are given more freedom,” she explains. We can’t be oblivious to the financial stability implications of capital flows, she asserts. Does she see the renminbi becoming the reserve currency in the near future? Clearly, as of now, the dollar is the reserve currency, though the Chinese do have the capacity to experiment because their reserves are so large, she explains, also pointing out pertinently that China is using the Hong Kong route to liberalising. “The renminbi can become the reserve currency if it becomes truly convertible, which is not the case now,” she says. The coffee arrives and after a few sips we have to conclude our conversation because, you guessed it, Gopinath has to rush for an appointment.
FE
