If your values are intact, you can face anybody and everybody
As part of Industry Interaction Cell’s flagship event Vertical Summit, Mr. Khushroo Panthaky was here at IIM K to give a talk on consulting. Senior partner at Grant Thornton, Mr Panthaky has over 16 years of experience in the banking and financial services domain and 30 plus years of wide ranging experience. A CA by profession, he has delivered many lectures with the Institute of Chartered Accountants of India. He is also a visiting faculty at the National Insurance Academy, Pune and reputed management institutes. PR cell had the opportunity to interview him right before his lecture and here are some excerpts from the session-
With the backdrop of high levels of NPAs and with due diligence assuming high significance, according to you, how can banks strengthen their credit appraisal processes, especially for large corporate borrowers?
Well NPA is a problem, as you are aware, for a long time it was only not surfacing. So if you have been following the newspapers, you must have seen that Raghuram Rajan had a diktat that in case the banks are not cleaned up before 31st March 2017, they’re going to face a lot of issue. So banks do have a challenge. I think if you look at the balance sheet and if you look at the recent news reports and all, more than 1000 crores have been written off by the banks in one quarter and another 1000 crores in the next quarter. How do the banks prevent this kind of a thing? By a better credit appraisal process and more importantly by ensuring that they do not get carried away by the requests and the diktats made by their seniors. Let’s say that you are an officer in the bank and you are actually required to do a credit appraisal but the person who’s going to get the money from the bank is a very good friend of mine and I’m the Chairman of the bank. And I tell you that ok, please make sure that you give him the loan. You may not want to give him the loan. So that kind of interferences should not be there. Secondly, strengthening of controls and systems, strengthening of credit appraisal process and keeping in mind how the industry is going to be performing. Now for example, there are industries like steel, aviation, mining, infrastructure, real estate which are in doldrums currently. Do you still want to continue to lend to them? And if at all you do, how do you cover your risk? Do you charge more interest? Do you have a better collateral? Collateral is more important. Securitisation is also important. So these are the steps.
RBI has taken the lead in bringing in a lot of disruption and innovation in the financial services sector with payments banks, unified payment interface. Do you think the regulatory framework is robust enough to adapt to these innovations?
I think there is a scope for improvement. Current regulatory framework always sort of seems to be adequate. But it’s very difficult to say that because unless and until you would come across the specific difficulties and problems that they are encountering in the future, you would not be able to mould the regulation. So the regulations also need to be evolved keeping in mind the difficulties, the kind of negligence, malpractices that would happen over a period of time. I believe that it’s fine but there’s scope for improvement.
Do you think the current innovations are enough to make a dent on the goal of financial inclusion?
I would say it’s good but it can be still better with more digitalisation coming in, with more analytics coming in. If you read today’s newspaper itself, in the economic times, it talks about financial technology- Fintech, which is sort of the buzzword right now. That will happen only through a better digitalisation process. So things can be much better but of course it’s far better right now, compared to what it was 10 years back. I mean I remember the day when I used to be an auditor and banks did not even have a system, they did not even have a computer. They were all doing the business manually. Now with the volume of transactions and global reach of the bank, you need not only a good system but a digitalised, analytical, high quality, robust framework to manage the risk.
Given your experience as a CA, what would you say is the core difference between a consulting role and a finance role?
A consultant normally would get to do a lot of things but today in the consulting world, there is a lot of specialization, which is happening. It can be within banking itself, there are 3 or 4 departments or specializations. Similarly within insurance, within broker dealing, within capital markets, within asset management. For a consultant, I would say he gets to see the world a lot better. Because he gets to go from one organization to another, can see the pros and cons, can see the evolutions, the dynamics of each organization. As far as the industry is concerned, one can always move from one bank to the other but he gets to do the same thing for 3 or 4 years. I am personally of the belief that somebody in the industry at some point of time gets some kind of complacency in the long term, doing the same thing again and again. Unless he wants to move from one department to another, or from one segment to another, like somebody moving from a banking to insurance or from insurance to asset management. Once you develop your name and reputation in one field and you go to the next one, you will have to start from the scratch. So a consultant’s role is more challenging, because he could be a jack of all and master of none.
You’ve had a vast experience of 30 years in this field. Can you share stories of some difficult clients you’ve had to work with?
Good you asked me this question. Well I’ve come across quite a few, so it’s very difficult to pick one. Yes, we’ve come across difficult situations, without naming a particular client. You know today that values are very important, in every field, in every industry. And when you talk about values, you talk about accountability, you talk about responsibility, ethics. I faced a situation where the financial results were approved before the board meeting and which were reviewed by me as the auditor. As a mandatory requirement, every quarter, the company declares the results and the auditors actually review and audit it. So I came across a situation where I saw the results were very different from what I had approved last evening. This should not be the case, since I should be aware of what those changes are. And when I asked the CFO, he said yes he has done some changes and he forgot to tell me. So I got very upset. I was sitting in front of the board meeting, in front of the board of directors and I have no clue what the nature of those adjustments are. And I had to tell the board very clearly that sorry the numbers have changed from 11 crores of loss to 8 crores of loss. The loss has come down by 3 crores and I do not have any idea and the board said that if you do not know, how can you say that in this meeting? I said of course you ask the financial officer of the company. They asked the financial officer and he said that you were not aware but we made these changes. The board said fine, so what’s wrong if you were not made aware? We are letting you know now. I said I’m sorry and for me the most difficult thing was that I had to walk out because I did not accept that particular 3 crores of change. So on one hand, there was a gun on my head, in terms of you take this number, there’s no alternative. And the other is to lose the client, lose the relationship. I walked out of the room, ultimately they came running after me and they said ok fine, you can sign off on your original number of 11 crores loss.
Advice for future consultants to survive in this challenging and continuously evolving environment?
Keep yourself very abreast of the latest developments. In consulting, you have to be on the top of things. Second, you need to consult your peers and other people, other firms within the industry. Your view in fine but you should also know the views of others. Keep your values very intact, because if your values are very intact, you can face anybody and everybody. And I just gave you an example of value, how you walk the path of righteousness. My advice to the young people is that consultancy is always great to do. I mean in terms of variety, you can be an auditor, you can be a tax consultant, you can be an adviser but whatever you do, you need to do it with a lot of conviction. If your conviction levels are low, you would never be able to reach the goal.
Interviewed by | Priya | Public Relations Cell – IIM Kozhikode