Indian central bank head quits after months of government pressure

In this Aug. 2, 2017 file photo, Reserve Bank of India Governor Urjit Patel, holds his spectacles during a press conference in Mumbai, India. (AP)
Updated 10 December 2018
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Indian central bank head quits after months of government pressure

  • Government officials have been complaining in the past few months that the central bank should allow lenders to make loans more easily

MUMBAI: The Governor of the Reserve Bank of India, Urjit Patel, resigned suddenly on Monday, following months of pressure from Prime Minister Narendra Modi’s government that is threatening the independence of the central bank, sending the rupee tumbling.
Government officials have been complaining in the past few months that the central bank should allow lenders to make loans more easily, and want the RBI to hand over some of its surplus reserves to help fund the fiscal deficit.
Modi’s ruling Hindu nationalist Bharatiya Janata Party (BJP), which must contest a general election by May, faces anger in rural India because of slumping farm incomes, and broader concerns about a lack of jobs growth in small businesses because they find it difficult to get banks to lend them money.
Getting control of the reserves would give the government more flexibility in spending on welfare policies and farm support schemes.
The departure of Patel, who cited “personal reasons” for his decision to resign immediately, comes at a particularly sensitive time for the government and financial markets.
On Tuesday, votes in key state elections are due to be counted, with exit polls suggesting the BJP could suffer some major defeats at the hands of the opposition Congress party.
Patel’s resignation was expected to roil financial markets on Tuesday.
Investors will want to know who is Patel’s replacement and how that will affect the direction of financial and monetary policy, analysts said. There was no clear frontrunner, but one of the names being speculated was former Finance Secretary Hasmukh Adhia who retired at the end of November.
“Markets certainly will be concerned unless there is further clarification that comes through tonight,” said R. Sivakumar, head of fixed income at Axis Mutual Fund. “I think tomorrow and over the next few days we can expect heightened volatility in the markets.”
The rupee was closed for trading when Patel announced his resignation, but forward contracts tracking the performance of the currency against the dollar outside of market hours posted their biggest fall in more than 5 years.
That added to earlier losses caused largely by concerns — triggered by the state exit polls — that next year’s election might end with a defeat for the pro-business Modi and a weak coalition government, leading to policy uncertainty.

BUILDING FOR MONTHS
Before the announcement, the 10-year benchmark Indian government bond yield rose the most since September, and stocks posted their worst close in four weeks with the broad NSE index losing 1.9 percent.
The pressure on Patel had been building for some months. The government has made it clear that it is not happy with the RBI’s policies and has backed that up by stacking the RBI board with representatives who support the government’s position. The board has also been taking a much more active role in challenging RBI policies than in the past.
Former RBI Governor Raghuram Rajan, who did not take an extension after his term ended in September 2016, said Indians should be concerned about what was happening.
“We should go into the details on why there was an impasse which forced him to take this ultimate decision,” Rajan told the ET NOW television channel. “I think this is something all Indians should be concerned about because strength of our institution is really important both for growth and sustainable growth in equity and the economy.”
Within the RBI there was a combination of anxiety and relief at the announcement.
“It was very shocking. We got to know about it only from the press release. Morale of employees is very down,” said one RBI official, who has been with the central bank for more than a decade. “This is very sad moment. Usually many people leave for home around 6 o’clock. Today many are still in office and discussing this with other colleagues. Everybody is stunned.”
But another official said that Patel, who only interacted with a few of his staff and was often inaccessible to key financial market players, had stifled discussion within the RBI and that now it might be possible to open up more. “Finally things will come to peace. I can talk more openly,” this official said.
The officials asked not to be named because of the sensitivity of the matter.

ARGENTINE WARNING
The rift between the government and the central bank became very public on Oct. 26, when RBI Deputy Governor Viral Acharya warned in a speech that undermining a central bank’s autonomy could be “catastrophic.” He even cited a meltdown in Argentine financial markets in 2010 after a struggle between the nation’s government and the central bank over who controlled the bank’s reserves.
Patel, who was previously a deputy governor and has an academic background, announced his departure in a terse 88-word statement on the RBI’s website in which he said that “on account of personal reasons, I have decided to step down from my current position effective immediately.”
He said it had been his “privilege and honor” to serve the RBI over the years, and cited the Bank’s “considerable accomplishments in recent years,” without being specific.
Last week, Patel declined to answer reporters’ questions about the rift with the government at a news conference.
Former government officials and analysts who follow the central bank said they were convinced the rift was a major factor in Patel’s decision to resign.
“The resignation is a clear sign of the government trying to interfere with the working of the RBI,” said Yashwant Sinha, a former BJP finance minister, told CNBC-TV18.
Modi issued a statement that suggested he did not want Patel to leave.
On Twitter, the Indian leader praised Patel as a “thorough professional with impeccable integrity.”
“He steered the banking system from chaos to order and ensured discipline. Under his leadership, the RBI brought financial stability,” Modi tweeted. “He leaves behind a great legacy. We will miss him immensely.”
There was speculation a month ago that Patel might quit over the government pressure, and that he might give health reasons as a reason to step down, but the rumors eased after the government and central bank reached an uneasy truce ahead of a RBI board meeting last month.
Patel resigned before the next RBI board meeting on Friday.
“The timing just before this week’s board meeting suggests that there’s still a huge gap between the government and RBI positions on key issues,” said A. Prasanna, head of research at ICICI Securities Primary Dealership in Mumbai. “Markets will now hope that the government has a plan of action ready so as to restore calm.”


Startup businesses that are shaking up the Middle East

Updated 20 January 2019
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Startup businesses that are shaking up the Middle East

  • Arab News has chosen six up-and-coming MENA businesses that are poised to make a big impact in 2019

BARCELONA: From transport to fintech, e-commerce to education, the Middle East and North Africa’s irrepressible young entrepreneurs are creating businesses that could remake entire industries.
Hundreds of MENA startups have been launched in the past few years and while most will fail (entrepreneurship is tough the world over), some will become “unicorns,” with businesses valued at more than $1 billion. Dubai-based ride-hailing firm Careem and e-commerce platform souq.com have already achieved that status.
Arab News has chosen six MENA startups poised to make a big impact in 2019.
Swvl, Egypt
Transport
Egypt’s cities are clogged with traffic, and public transportation is inadequate, but an innovative company founded by young Egyptians aims to both ease congestion and provide a cheap, convenient and reliable means to get around.
Swvl, which is similar in concept to Uber, is a mass transit system in which users can book rides on private buses and mini-vans via the company’s app — simply submit where you want to go, select the time and route, and book your trip. It currently operates more than 200 routes in Cairo and Alexandria.
With more than 500,000 downloads on Android, Swvl plans to expand across the Middle East, Africa and Asia, and last month secured “Series B” funding. The company declined to reveal the exact amount but told Forbes it was “tens of millions of dollars.” It raised $8 million in a previous funding round.
Wadi, Saudi Arabia

E-commerce
Saudi Arabia’s Wadi.com is a homegrown e-commerce site that could usurp Amazon-owned rival Souq.com as the region’s leading online marketplace.
Already serving more than 25 cities in Saudi and the United Arab Emirates, Wadi specializes in electronics, fashion, fragrances, and beauty and health, and is expanding into more product ranges.
Dubai-based retailer and mall operator Majid Al-Futtaim, which owns Mall of the Emirates and holds Carrefour’s Middle East franchise, led a $30 million investment in Wadi in October.
Carrefour will become the long-term partner for Wadi Grocer, which currently operates in Riyadh, Jeddah and Dammam, supplying food and other groceries. Through the partnership, customers can buy more than 12,000 products from the French supermarket chain. Promising delivery within two hours, Majid Al-Futtaim claims this will the first service of its kind in the Middle East with such a diverse product range.
Sarwa, UAE
Financial services
Sarwa is a robo-advisory that enables clients to invest in a variety of financial products via its simple-to-use app. With no commission and very low fees (a customer with $10,000 invested would pay around $7 per month), Sarwa promises to simplify and democratize investing.
Regulated by the Dubai Financial Services Authority (DFSA) and insured by the US government up to $500,000 per client should Sarwa fold, the company raised a further $1.3 million in September, bringing its total funding to more than $1.5 million.
Co-founder Nadine Mezher told Arab News that in 2019, the company will increase its customer base in the UAE and expand to new markets, as well as focusing on business-to-business clients.
“With the lack of formal pension funds for expatriates here, Sarwa aims to work closely with the corporate sector to offer employees saving schemes plans and extend its offering from individuals to companies,” she said.
Kamkalima, Lebanon

Education
Siroun Shamigian quit a 20-year teaching career to launch this Beirut-based startup, which uses artificial intelligence and machine learning — via a web-based platform — to help students from grades 4 to 12 to improve their Arabic skills. While new, tech-based approaches have made it easier and more engaging for children to learn other languages, no such offerings existed for Shamigian’s mother tongue, spurring her to act.
Launched in late 2016, Kamkalima’s platform features a vast digital library with interactive lesson plans that teach reading, writing, listening, speaking and critical thinking. Lessons are automatically graded and can be self-taught by students or led by teachers.
Currently used by more than 20,300 students at 65 schools in Lebanon, UAE, Jordan, Egypt, Qatar, and Kuwait — and having received $1.5 million in funding in November, Kamkalima is poised to accelerate its expansion. “We want to expand the team, work on the product and more specifically, scale in our current markets and enter new ones,” Shamigian told Arab News.
WakeCap Technologies, UAE

Construction
Saudi engineer Hassan Albalawi is the creative genius behind this Dubai-based startup that uses proprietary location technology to connect workers, tools and equipment on construction sites to improve safety and productivity. By connecting workers’ helmets (without the need for WiFi or 4G, which can be unreliable on-site), contractors know exactly where their staff are, reducing the need for clocking in and out.
More importantly, the same helmet sensors keep workers safe, buzzing when they enter restricted zones and alerting them when a site evacuation is underway. Likewise, workers can call for help via an emergency button. WakeCap, which in November received $1.6 million in funding from investors, is running a pilot scheme at Dubai’s under-construction Opera Grand Tower. The product should launch commercially in early 2019.
Unifonic, Saudi Arabia

Communications
Founded by brothers Ahmed and Hassan Hamdan, Unifonic claims to be the Middle East’s leading cloud communications platform. Put more simply, the company’s technology enables businesses to instantly and simultaneously communicate with millions of customers via voice and text.
From sending a mass notification that a flight has been canceled to providing secure two-factor authentication to individual customers, Unifonic’s technology has multiple uses and has found an enthusiastic audience for its services across diverse sectors.
Its more than 5,000 clients include Aramex, Uber, Alinma Bank and Domino’s Pizza.
In October, STV — a Saudi Telecom-backed venture capital firm — led a $21 million investment round in Unifonic, which operates in five countries. The money will be used to expand into new markets and fund product development.