Become a Creator today!Start creating today - Share your story with the world!
Start for free
00:00:00
00:00:01
Treasury Beyond Borders - Treasury in 2030: India’s playbook from UPI to the digital rupee
65 Plays24 minutes ago
Join Aditya Lakhanpal, Managing Director, Corporate Sales, Markets and Securities Services, HSBC India and Mohit Agarwal, Managing Director, Head of Global Trade Solutions, India and South Asia, HSBC as they share essential insights for treasurers navigating change in one of the world’s fastest-growing markets. From UPI’s instant payments and the digital rupee to GIFT City’s rise and ESG integration, this episode explores the opportunities and challenges reshaping cash, liquidity, and risk management.
Recommended
Transcript
Introduction to Global Treasury Trends
00:00:01
Speaker
Welcome to HSBC Global Viewpoint, the podcast series that brings together business leaders and industry experts to explore the latest global insights, trends, and opportunities.
00:00:13
Speaker
Make sure you're subscribed to stay up to date with new episodes. Thanks for listening. And now onto today's show.
00:00:23
Speaker
Welcome to this special TMI podcast series in collaboration with HSBC called Treasury Beyond Borders, Balancing Risk and Opportunity Through Global Growth.
India's Role in Global Treasury
00:00:33
Speaker
I'm Elena Hill, Editorial Consultant at TMI, and over the course of this series of podcasts, I'll be exploring how the global treasury is evolving amid geopolitical shifts and digital transformation.
00:00:44
Speaker
Across the episodes and with insights from HSBC experts, We'll dive into key themes both globally and across different regions, from managing risk in uncertain markets to leveraging new trade corridors and emerging technologies.
00:00:58
Speaker
And I'm delighted to be joined today by two gentlemen to talk about India and the surrounding region and all of the innovation that is happening there. And they are Aditya Lakanpal, who is Managing Director Corporate Sales, Markets and Security Services, HSBC India, and Mohit Agarwal, who is Managing Director, Head Global Trade Solutions, India and South Asia.
00:01:22
Speaker
So guys, welcome. It's so good to have you here. And I'm really happy to be talking about India and the surrounding region because there's so much going on. It's a country that's very dear to my heart. I was over there last year chatting with many treasurers about innovation. And I know you're seeing it all happening on the ground. So welcome. It's a pleasure to have you
Overview of India's Economic Growth
00:01:42
Speaker
here.
00:01:42
Speaker
Aditi, I thought we'd maybe kick off with a bit of a an overview of what's going on just to set the scene for the listeners. So as global treasury teams are rethinking how they manage cash, liquidity, risk, because we've got these increasingly fragmented markets out there,
00:01:59
Speaker
Where do you think India now sits in that bigger strategic picture? And how would you say its role has evolved over the past few years? Tell us what you're seeing. Sure. And thanks, Eleanor, for having me.
00:02:10
Speaker
Let's start with a bit of economic overview, right? So on the economic front, India's GDP is now close to $4.2 trillion. dollars And in the last couple of years, it's been growing at a healthy clip of about 6.5% to 7% year on year.
00:02:23
Speaker
Now, given the sheer scale of the opportunity that India presents, most corporates either want to sell in India, or they want to source in India, or they want to do both. And therefore, India is becoming very, very relevant for corporate treasurers.
00:02:36
Speaker
Now, to my mind, one word that is synonymous with this period of expansion that India has seen is liberalization. We've seen liberalization of banking regulations, liberalization of securities regulations, liberalization of how companies can invest in India.
00:02:51
Speaker
the tax regime, and so on.
Innovations in India's Financial System
00:02:53
Speaker
Now, coming to your question, you know in the context of how this is relevant for corporate treasurers, in the context of cash, liquidity, and risk management, there are three things that really stand out for me.
00:03:03
Speaker
To begin with, it's the velocity of payments. India is the largest fast payments market in the world today. To put things in context on any given day, Indians are putting through more transactions through UPI than visas processing through it all of its network around the world.
00:03:19
Speaker
my goodness, that's an amazing stat. I love it. So clearly India is one of those few markets where corporate treasurers can undertake payments 24 hours a day, seven days a week. And I'm sure all of this is music to corporate treasurers because they often have to deal with last-minute liquidity pressures.
00:03:35
Speaker
So that's the first thing. Second is cash pooling. Yes, the Indian rupee isn't fully convertible and still has capital controls around cross-border cash pools. But the good news is that one can undertake domestic cash pools within subsidiaries in India, subject to the structure meeting certain norms.
00:03:52
Speaker
This can be a great tool to optimize surplus liquidity onshore. And finally, is cross-border inter-company financing. This is one of the areas where we've been seeing a significant amount of liberalization in recent years with the usage of inter-company debt from overseas parent to the Indian subsidiaries.
00:04:11
Speaker
The external commercial borrowing route or the foreign portfolio investment route are two oft-use approaches for this. So in summary, I would say fast payments, cash pooling, ability to use group funding for India expansion have definitely made things easy for corporate treasurers. Oh, Aditya, I agree so much. And I think there's still a little bit of a misconception around India and the challenges in some of the markets like you've described there, but things have moved on so much and so quickly. So it's really good to hear that from your
Impact of UPI on Liquidity Management
00:04:39
Speaker
side. And Mohit, I wanted to come across to you just to come back to the UPI point, which Aditya raised so well and gave us some great stats on. Because it's one market i always point to when I'm talking about real-time payments as such a success story. But
00:04:54
Speaker
What does UPI mean for the way treasury teams are managing their liquidity and reconciliation? Tell us a little bit about how clients are dealing with it. Yeah, thank you so much, Eleanor. Thank you for having me and Aditya.
00:05:08
Speaker
I think Aditya gave a fantastic stat, right? I mean, he just spoke about the number of transactions, how exponentially they have grown for UPI. India is perhaps one of the few markets where corporates can undertake payments 24 hours you a day, seven days a week. So it's radically transforming how treasury teams manage liquidity and reconciliation. So let's just go into these two aspects, which are most important, a bit more in detail, right? So Just from an enhanced liquidity management perspective, there are three aspects which become very important.
00:05:39
Speaker
First is immediate fund availability. What UPI enables is instant settlement. This basically offers corporate treasurers real-time visibility of their cash funds.
00:05:51
Speaker
This allows for a more dynamic and active cash management because now treasuries have to react to inflows and outflows as they happen rather than wait for a bad settlement.
00:06:02
Speaker
Second, again, extremely important is reduction of idle cash. Real-time settlements reduce the need for holding large precautionary balances. Therefore, funds can be invested more optimally across the organization, resulting in better yields.
00:06:18
Speaker
One aspect which, again, both Adityan have highlighted is that Operations are now 24 by 7. So it's also becoming a challenge for the treasurers or the treasury teams to ensure that you move away from the traditional ways of thinking yeah and really upgrade your platforms to ensure that these are more robust systems, which can basically account for round-the-clock staffing and automation. yeah So I think from a liquidity management perspective, it's music to all the treasuries.
00:06:46
Speaker
From an automation and acceleration of reconciliation as well, again, all UPI transactions come with unique identifiers. so They can be consumed by their platforms and can result in instant reconciliation.
00:07:02
Speaker
Again, given that the number of these transactions have increased so exponentially, most of the treasuries are now upgrading their platforms in order to ensure that they can take on this data which is coming in and help in real-time matching of funds.
00:07:17
Speaker
I think one aspect which is important is what real-time payments are doing is ensuring that the credit limits which customers give to their clients get now made available on a real-time basis. So they have to update that information to their sales team etc. so that more business can be done with the same credit limits.
00:07:37
Speaker
So overall fantastic times from a treasury perspective who are using real-time payments for their operations. brilliant stuff. Mohit, thank you so much for that. And I completely agree. It's getting away from those legacy batch processes that treasurers are so used to. And there's no point having real time just in one area of the operations. You've got to have it across the ecosystem, which goes to it all of the systems points that you've made there. So thank you for that. And it's really interesting to know what the clients are up to and how they're getting ahead of all of this. But Aditi, wanted to come back to you because we're in a very unusual, challenging environment out there at the moment. And there's a lot going on in reshaping cross-border payment flows because trade corridors are changing with everything that's going on with the US, the EU, the Middle East. So what's the role of India within all of that?
UPI International Expansion and INR Invoicing
00:08:29
Speaker
Let me come back to fast payments again. So as fast payments are becoming the norm of the day, on the cross-border front, one of the most promising and exciting developments has been the international expansion of India's UPI.
00:08:41
Speaker
For example, anyone traveling to Paris now can buy a ticket at the Eiffel Tower using their UPI app. The UPI is now, you know, being integrated with similar systems in countries such as Singapore, the U.S., UAE, and so on.
00:08:53
Speaker
These bilateral linkages, to my mind, are enabling near-instant fund transfers, which significantly reduce settlement lags and improve recon cycles, as Mohit was also alluding to. But this is now happening on a cross-border basis, right?
00:09:06
Speaker
And another area outside of fast payments that India is definitely spending a lot of time on is promoting international trade in INR. This is being done in multiple ways. To begin with, India setting up local currency trade settlement arrangements.
00:09:19
Speaker
An example of this is the Rupee Dirham payment bridge with the UAE, which is expected to boost cross-border trade with UAE to over $100 billion. dollars The second thing India is doing is on the risk management front, where India has eased hedging guidelines by giving access to liquid and deep onshore markets to global treasuries for hedging their risk on the INR.
00:09:38
Speaker
And the third thing that India is doing is to allow non-resident entities with business interests in India to open special non-resident rupee accounts. This can be a big enabler that allows companies to invoice and settle in INR and do business in India.
00:09:52
Speaker
So, you know, fast payments on the cross-border side and INR invoice trade, which can be hedged and delivered onshore, the emerging themes in this space. making a huge difference. And I think the mindset in India is just so open to innovation as well. And it was really noticeable, Mohit, when I was over there in November last year, that some of the treasurers I was speaking to, they were so very open to working directly with fintechs, embracing AI. It was really front of mind for them, looking to modernize their operations in the best way possible while still having the
00:10:27
Speaker
stability and rigor that you need as a treasury team. So tell me a little bit about what you're seeing with clients around that, how they're leveraging all of these innovations. Yeah, you're right. The whole startup and the fintech ecosystem has actually done a wonderful job over the last decade or so.
00:10:44
Speaker
As per certain reports, the number of registered fintechs in India have grown from approximately 2,000, five years ago, over 10,000 at present.
00:10:55
Speaker
thousand at present payments, digital lending, wealth tech, insure tech, neobanking, SaaS. These are the main themes which come out. But with a number of fintechs which are now available, ah which are now sort of working, what they are looking for is they are looking at working with various corporates at various niche areas to provide them a better way of doing things.
00:11:21
Speaker
And many Indian corporates now are leveraging several prominent fintech companies, providing specialized solutions for across treasury management. So I'll give you a few examples. I mean, just there's so much that is happening, I can only but list a few. But let's talk about real-time cash visibility and liquidity optimization, right? I mean, something extremely important.
00:11:42
Speaker
You have various platforms which now offer to corporate real-time view across all their bank accounts, right? their gateways, giving treasuries a much more granular and up-to-the-minute control of their cash positions.
00:11:58
Speaker
Even from a dynamic liquidity and forecasting perspective, many tools are now available which use past data to predict the liquidity requirements of the company. If you look at automation and AI-driven workflows, we have fintech companies which are helping Treasury with end-to-end reconciliations.
00:12:17
Speaker
Again, predictive risk analytics and fraud detection and compliances are again an important area which are being worked on. On supply chain, which is very close to the business which I'm in, we have seen various platforms come in with end-to-end solutioning and terms of vendor management. right So there are various solutions which are being provided.
00:12:39
Speaker
The good part is that the Indian fintech companies, along with various banks, are building scalable platforms. And therefore, that really helps treasuries to really integrate well and make these more cost-effective from an overall perspective.
00:12:56
Speaker
So very, very interesting work being done by the fintechs. I think the way the treasuries are adopting some of the new platforms is, again, amazing. And you will see much more happening in this space going forward as well.
00:13:07
Speaker
Mohit, thank you so much for that. And we almost need a whole other podcast episode to talk about everything that's going on with fintech and
The Digital Rupee's Implications
00:13:15
Speaker
AI. As you say, there's so many examples and the the treasurers are ah embracing them brilliantly. But Aditya, I wanted to come back to you and talk about the digital rupee because it's...
00:13:26
Speaker
So exciting. There's again so much potential here. Tell us a little bit about the impact of the rollout is expected to have on treasurers, particularly thinking about things like settlement and cash management.
00:13:38
Speaker
What can we look forward to? Yeah, it's hard to have a conversation nowadays without talking about digital currencies in some shape and form, right? So so let me start with a short background on the digital rupee and then we'll hand over to Mohit for a bit of overview on how corporate treasurers can use it. So the digital rupee is India's central bank digital currency or CBDC.
00:13:58
Speaker
It's a digital form of India's physical currency, the rupee. It is issued by the Reserve Bank of India, offers features similar to physical cash like convenience of use, guarantee of RBI, finality of settlement and so on.
00:14:10
Speaker
The usage of digital rupee is currently being piloted across both the retail and the wholesale segments. So on the retail side, the digital rupee is being used to receive or send money and make payments for transactions, just like a physical rupee note.
00:14:23
Speaker
through a bunch of Indian banks. On the wholesale side, the wholesale central bank digital currency has two use cases right now. One is for settlement of funds for secondary market transactions in government securities.
00:14:35
Speaker
And second is for settlement of interbank lending and borrowing in the call money market. The wholesale version, therefore, is designed to improve interbank settlements and cut collateral costs in government securities and is again being piloted with Indian banks right now.
00:14:48
Speaker
Additionally, it's the programmability feature that allows the sponsor entity or the user to ensure that the funds in the CBDC wallet are used for a specific end use. That, to me, is the most powerful feature offered by the digital rupee.
00:15:00
Speaker
But let me bring in Mohit here to explain the significance of this to our corporate treasurers. Brilliant. Yeah, thanks. i so As Aditya stated, the digital rupee is currently being pilot tested across both the retail and wholesale segments.
00:15:14
Speaker
I think like the UPI, the digital rupee will enable a near instantaneous settlement of the wholesale and retail transactions, which should impact treasuries in reducing settlement lag.
00:15:25
Speaker
The automation and programmability, which is possible in the CBDC platforms, could further streamline corporate workflows by enabling programmable settlement, escrow arrangements, and just-in-time payments.
00:15:39
Speaker
I think what is important is that every digital rupee transaction is recorded immutably, which provides a detailed audit trail of all the transfers. yeah Once we see this facility reaching scale, i think this should then reduce costs for corporates.
00:15:55
Speaker
So again, something which we are looking forward to seeing. Yeah, it does make sense. It really does. And just wanted to come on to one of the other topics that corporates often ask me about around India, ones who aren't necessarily operating there at the moment, but thinking about it. And that is the GIF City and India's International Financial Services Centre. So how are you seeing more global treasurers make use of these to manage things like multi-currency flows and those regulatory exposures? Aditya, maybe you can give us a flavour.
Gift City Benefits for Treasurers
00:16:26
Speaker
ah Great question, Eleanor. In order to understand the relevance of Gift City for treasurers, let's first revisit why global treasuries exist. So they help manage liquidity centrally, they centralize risk management, they help companies to use their financial resources strategically and efficiently.
00:16:42
Speaker
Now, how does Gift City dovetail into all of this? To begin with, it has a very comprehensive framework which is already in place for treasury centers. So that framework allows and outlines permissible activities around FX risk management, around cash management, fundraising, intra-group financing.
00:16:59
Speaker
So you've already got a broad framework that one can work off. Secondly, regulatory efficiency. Now, Gift City is regulated by a single unified authority. which is the International Financial Service Authority or the IFSCAR as we call it.
00:17:13
Speaker
Having one common regulator overseeing banking, securities markets, pension, insurance regulations is a big plus. So ease of doing business. Third, Gift City has a very attractive tax regime.
00:17:25
Speaker
When it comes to income tax or tax on dividends and interest rates, I won't get into the details because those are best advised by a tax advisor. But I must actually bring in Mohit here again because he was recently in Gift City and maybe can give us a better color on, you know, what he saw on the ground. Oh, yes. Go on, Mohit. Please do.
00:17:41
Speaker
Yes, absolutely. And each time you visit Gift City, you just see more and more things coming up. So it's developing really well. i think there are two aspects in addition to what Aditya said, which I think are quite important.
00:17:53
Speaker
One is just from a cost savings perspective, right? I think Gift City offers a competitive cost benefit when you compare it with other RTC centers offshore. Whether it is the world-class real estate or skilled human capital, companies will find both available in abundant supply and at a very cost-effective structures.
00:18:13
Speaker
To add to it, the plug-and-play facility and the support subsidies being offered by the Gujarat government GCC policy enhance the appeal of the GIF city. We talked about the ease of doing business. I think just three aspects there which are important.
00:18:29
Speaker
One is just the talking about the cross-border payments. There are no restrictions on holding or transferring funds in major foreign currencies, and it is easy to make cross-border remittance from gift.
00:18:41
Speaker
I think Gift City provides a single will nuclear rent which Aditya spoke about and with several international and Indian banks as well as capital markets present in Gift there are deep pools of liquidity already existing for corporate treasuries.
00:18:57
Speaker
So overall exciting space to be in in terms of Gift City. Yeah it makes a huge difference for corporates and I need to visit there now. You've made it sound like I'm coming over again this November to India. So I think I need to at least go and have a look at what's going on on
Integration of ESG in Indian Treasury Strategies
00:19:13
Speaker
the ground. But Mohit, one other thing I wanted to quickly ask you about was I was really struck last time I was in India about how important ESG is to the corporates that I was speaking to. And they were very clear that they wanted to integrate it more into their cash and liquidity strategies. So what kind of practical steps
00:19:33
Speaker
Are seeing Indian treasury teams taking around that? Yeah, so ESG has become ah very, very important metric for most of Indian large corporates. In the last few years, the industry saw a wave of commitment from all major groups towards a green and sustainable future.
00:19:51
Speaker
This also aligns very well with the government strategy of increasing the penetration of renewable energy in India and build a greater India. I think some of the practical steps will include ah compliance to the ESG reporting standards.
00:20:05
Speaker
I think treasury teams in large corporates are aligning with SEBI's mandatory business responsibility and sustainable reporting framework, which requires them to disclose on energy use, carbon emissions, water usage, waste management, and social impact matrices.
00:20:24
Speaker
I think from a pure digital digitalization and automation perspective, I think that's again a benefit because as you reduce paper usage and greenhouse gas emissions, they all contribute to the environmental goals.
00:20:38
Speaker
Increasingly, Treasuries are embedding ESG in investments and funding decisions. um Strategy teams increasingly incorporate these criteria when managing cash investments and funding strategies, favoring green bonds, sustainable fixed income instruments, and responsibly governed counterparties.
00:20:58
Speaker
I think all this is really helping the whole ESG strategy within the Indian corporates. Some of the other aspects where I think Treasuries are playing an important role is in enhancing transparency and reporting, cross-functional collaboration and governance, again, important aspects of the ESG framework, as well as overall risk management.
00:21:19
Speaker
So those are the main aspects which we are seeing Treasuries forming part of the ESG policy. Yeah, it's very interesting to see treasurers really driving this and like you say, wanting to embed it and make sure they've got that cross-functional collaboration, the governance and embedding it into all of the financial decision making where possible as well, even around investments. So lots to watch and lots of best practice examples coming out from the country as well.
00:21:46
Speaker
I know we've covered an awful lot
Success Strategies for Treasury Teams in India
00:21:48
Speaker
in this podcast. So Aditya, maybe we could just wrap up with some final thoughts looking ahead. What do you think will define success for treasury teams operating in or through India over the next sort of three to five years, given all of these lovely opportunities that we've spoken about, but there's obviously risks to balance off as well. So how can they make sure that they're setting themselves up for success?
00:22:12
Speaker
You know, the times are they are a changing, right, as they say. So when HSBC conducted its flagship risk management survey last year, ongoing geopolitical tensions emerged as one of the key themes. ah While some of those still exist, additionally, tariff-related uncertainties have made doing business more complex.
00:22:30
Speaker
Trade and investment is you know still impacted. New liquidity and effects risk challenges have emerged. And companies are trying to seek new trade relationships and adjust their supply chains. In this kind of an environment, I would say two things are going to be very important.
00:22:43
Speaker
The first is adaptive risk management. Adaptive because it's going to be the need of the art. Treasuries will need to bring their A game to the table every single day and be nimble. For example, you know while foreign exchange is often top of mind when thinking of risk management, and rightly so, treasurers increasingly need to focus on other asset classes that could induce risk. For example, interest rates or commodities. so right So that's number one for me.
00:23:09
Speaker
I guess the other thing very specific to India is, as we've discussed so far, that in India, the pace of change is fast. yeah Be it regulations, be it systems, be it scale, be it business models, things change very quickly.
00:23:24
Speaker
UPI is a good example of this as we spoke, right? So clearly, I think when it comes to India, it's going to be very important to have, you know, one's ears close to the ground yeah and have strong partners who offer timely insights and local expertise.
00:23:37
Speaker
Those would be the two things for me. Yeah, it makes a huge difference. And I can vouch for that having been on the ground myself and been in it and feeling all of the innovation as well. But it's just that local knowledge that makes such a difference.
00:23:50
Speaker
Now you're making me want to come over to India even before November. But thank you guys so much for joining us today, sharing your insights and everything that's going on on the ground and over there. So this brings us to the end of this episode of Treasury Beyond Borders. And thanks to everyone for tuning in. I hope you enjoyed the discussion. And be sure to to subscribe and stay updated on our upcoming episodes.
00:24:15
Speaker
Also watch out for our articles accompanying this series. And thank you very much again to our excellent speakers and to everyone for listening. Thank you for joining us at HSBC Global Viewpoint.
00:24:29
Speaker
We hope you enjoyed the discussion. Make sure you're subscribed to stay up to date with new episodes.