Pathbreakers 2
“The future of healthcare is not in nice interiors but in higher standards of patient care”

Dr Ramakant Panda narrates his inspirational story of ascent to the league of the world’s top heart surgeons

Dr Ramakant Panda’s name comes up very high on any list of the world’s top heart surgeons who perform high-risk surgeries. Coming from a village in Orissa, Dr Panda was a topper at the All India Institute of Medical Sciences, New Delhi, but dejected by favouritism, he decided to go abroad. Good for him and for India because Dr Panda went on to do his Fellowship at the Cleveland Clinic, US, where he was trained by the pioneer of bypass surgery, Dr Floyd D Loop. Dr Panda has done over 10,000 bypass surgeries, making him one of the most prolific surgeons in the world. More importantly, he has performed more than 1,500 high-risk surgeries which have offered new life to many patients who were considered ‘inoperable’. He is the first in India to have introduced beating heart surgery, as well as ‘off-pump’ bypass surgery. His failure rate is just 0.5% against a world average of 2%. But being the top heart surgeon is not what makes him stand apart. It is his integrity, passion and humanism. One unique honour he has received was the prestigious Rashtriya Samman from the Income Tax department, for being one of the highest taxpayers between 1994-95 and 1998-99. Unlike many top doctors, Dr Panda refuses to be paid in cash. The same integrity and zeal has gone into setting up of the Asian Heart Institute in Mumbai, probably India’s best heart hospital. Here is his inspirational story

ML: Could you tell us about your education and family background?

I was born in Orissa in a place called Jaspur. My parents were landowners. I spent my early childhood with my grandfather who was a freedom fighter. He was the headmaster of a school and a strict disciplinarian. For several years, my elder brother, a cousin, and I lived with my grandfather. I was with him till he died; I was then in the fifth standard. After that, I returned to live with my parents. My grandfather’s discipline had a tremendous impact on me. He loved us; at the same time, he was very strict. He used to insist that we wash our dishes after meals and wash our own clothes.

ML: Where did you study?

Initially, at my grandfather’s school. After his death, I came back to my village and had to walk around 7-8 kilometres each way to school and back. My three brothers, my sister and I, all went to the same school. All of us used to stand first in our class. After high school, I went to BJD College.

ML: Did you know by then that you wanted to be a doctor?

RP: I had some interest, since one of my uncles is an ENT surgeon. Then, one of my cousins got married to a doctor; that had some impact on me. I clearly remember one incident that made me aspire to become a heart surgeon. In 1969, LIFE magazine had done a cover feature on Dr Denton A. Cooley (president and surgeon-in-chief, who founded the Texas Heart Institute), one of the all-time great heart surgeons, who had done the first heart transplant in the US. My uncle had brought a copy of the magazine, which had a big picture of Dr Cooley. That is when I had the dream of becoming a heart surgeon.

I studied for two years at BJD College and then went to SCV Medical College; I was the university topper in both places. It is at Cuttack Medical College that I began thinking of becoming a heart surgeon. The actual drive to become a heart surgeon came in the third year when clinical postings began; my first clinical posting was in the cardiology department. I was fascinated with heart surgery. I was always among the top five in the class at the medical college. For a year after that, I did my post-graduation from Burhampur Medical College, which is near Cuttack. I then appeared for the all-India entrance test to get into the AIIMS at New Delhi (All India Institute of Medical Sciences). I did my post-graduation in surgery and heart-surgery there between1980 and 1985. That is where the real grinding took place. I was always a hard-working student, but the actual drive to excel and do better in life happened at AIIMS. Those were among the toughest five years of my life, but they were also the formative years, which made me work hard. I often work about 18 hours a day. Actually, I used to work 18 hours a day on an average; now I have cut down to 14-16 hours a day. It was a really tough time for me.

ML: Tough because of the hard work, or even otherwise?

RP: Yes, even otherwise. I would rather not talk about it, except to say that there was a lot of bias. But that made me resolve that I wanted to do something and show people what I can do. So indirectly, it helped me.

ML: Is that when you decided to go to Cleveland?

RP: That was when I decided to go out of the country to get more training. In those days, in India, there were only four or five hospitals in the whole country doing heart surgery and they operated as a close-knit group. So if your boss was not happy with you, you were gone, because everybody knew one another. So there wasn’t much opportunity. I knew then that I had to go to some good place outside India and come back. So I gave those two qualifying exams for the US: it was called USMLE (United States Medical Licensing Examination) those days. It was getting tougher and tougher for doctors to go to the US, but I passed both the exams and began to search for institutes which offered the specialisation I was looking for. One of the consultants at AIIMS helped me get an appointment with Dr Dudley Johnson. Those days, Cleveland Clinic was the best in cardiac care. Luckily, a friend of mine went and spoke to the chief of cardiology about me and they took me in. So I went to Cleveland in 1986. Initially, I was under a culture shock. But that is where my whole life changed. In six months, I became the pet of my boss, so much so that even now we have a father-son relationship. His name was Dr Floyd D. Loop (chairman and CEO of Cleveland Clinic from 1989 to 2004). If you ask me, he was one of the founding fathers of bypass surgery. Within six to 12 months, I was fairly close to him and that is where I learnt all my surgical and technical skills.

ML: Cleveland Clinic is among the best in the world, isn’t it?

RP: Today, it is the best. For the last 15 years, it is rated as the best in the world. It is a very tough place; it requires you to be extremely hard working but with zero bias. If you are good and you are hard working, it is immediately recognised. That made a big difference to me. Within a year, I was doing the maximum number of surgeries as a resident – they never give so many surgeries to a resident doctor – to the extent that when I left, my boss wrote that I was the best resident doctor they ever trained in that place. I almost wanted to settle down there; at the same time, I also wanted to come back to India.

ML: When was that?

RP: This was in 1992. The reason I wanted to settle there was that I was also involved in a heart transplant programme. We used to go at night to harvest hearts from the small village and town hospitals. That is when my concept of a hospital underwent a complete change. Those days, AIIMS was the best hospital in India, but I saw that there was simply no comparison in the infrastructure and facilities that even small-town hospitals and community hospitals in the US had – they were far better than ours. So I thought I could come back and build that type of a hospital here. At that time, I had a staff position at Cleveland Clinic as a consultant which was one of the most sought after positions those days. But one day, while I was operating with Dr Loop, I told him that I wanted to go back to India. He said, “What?” He was stunned and wasn’t happy with my decision at all. I said, “Yes, I want to go back and start a small heart hospital and I want you to help me.” Those days, Cleveland Clinic was expanding very rapidly under him. He said, “Why don’t you go to one of these hospitals and develop a cardiac surgery programme?” But I told him that I wanted to go back and, after six years, I returned.

At that time, I wanted to do transplant surgery programmes. There is a place called Hairfields in London. There was a surgeon called Dr. Magdi Yacoub… he is also absolutely one of the all-time great cardiac surgeons. I spent around nine months to a year with him to learn about heart transplants. I came back in 1993.

ML: When you decided to return to India, did you know which city you would come back to?

RP: I just wanted to set up a heart hospital; that was my dream – my aim was to do it in Delhi. I knew people there. In those days, there was only Escorts Hospital and AIIMS; Batra Hospital had started but it wasn’t doing well and Modi Hospital was supposed to come up. Once I decided to return, I started coming to India on short trips from 1990 onwards. The first time I came here, I thought ‘no way I want to come back’. Then I introspected and decided that I did want to return, so I’d better start acclimatising myself. I came to India eight times in the next two years.

ML: Were you married by then?

RP: Yes, I got married in 1986 and both my children were born in the US. At Cleveland Clinic, our work routine was 40 hours of work; go home to sleep for eight hours and come back work again for 40 hours – this went on for three years. You earned money, but you got up at 4.30am; by 5am / 5.15am, you left for the hospital; at 5.30am, your morning round starts; 5.30am to 7.00am, you take your ICU round. The previous night’s team hands over charge to you. By 7.00 O’clock, if you are assigned to the operation theatre, the whole day you are in there; otherwise you have 60 patients to see – even at one minute per patient, it takes an hour. There was absolutely no time to eat; you often got time to eat only at 2pm.

ML: Why was it such a punishing schedule?

RP: You got used to it. Part of the reason is they wanted to keep the number of trainees to the minimum and give you that kind of intensive training. For instance, whatever I learnt in three years at AIIMS, I learnt in six months at Cleveland. So you go through a punishing schedule but you basically do a 10-year training in two to three years. When you leave Cleveland, you are one of the best. I think this was the best period of my life. My hard work was recognised and I was the most popular doctor there. Even now, people remember me and if I need anything, they will always help me without hesitation.

The work culture at London was very different. I came back from there in nine months because it was just like the Indian government hospitals. Nobody came before 9am; I was the only guy there at 6.30-7.00am. Nobody was discharged quickly from the ICU and there were long waiting lists. I tried to push the standards and get them to handle more cases, but it only made me a lot of enemies. So I thought: this is not the right place for me, I must get out.

When I returned, my first stop obviously was Delhi, but no opening was available there. Bangalore was the next option because my sister was there. Honestly, Mumbai was not on my radar; but that was the best thing that happened to me. So I went all over the place – I went to Apollo (Hospital) and that is another story; it is one of those experiences that taught me not to trust certain types.

ML: What happened at Apollo Hospital?

I had signed an agreement to join Apollo Hospital at Hyderabad. I did some cases at Apollo, Chennai, and I went back to resign my job at Cleveland and wind up. A week before I was to leave, I received a phone call saying ‘we want to delay your appointment’. So I called up Apollo chairman’s daughter – Mrs Sangita Reddy – and she said, ‘we think you will be better at the Apollo Hospital coming up at New Delhi.’ I said, “I am ready to go to India, I have sold off everything and I have bought a ticket; and, at the last minute, you are saying wait for two years, how do I trust you?”  I decided it was not the right place for me.

Some time later, I was passing through Mumbai on my way back to the US. That’s when one of my patients, Dr PV Mehta, a gynaecologist at Jaslok Hospital and his wife also a eminent doctor – took me out for dinner. When they heard about my plans, they said, ‘why don’t you consider Mumbai?’ They insisted that I meet them at Jaslok the next day, although I was flying out. They were showing me around, and I met Dr AV Mehta. When he came to know that I was from Cleveland and was looking for an opening in India, he said: ‘you are joining us here’. He took me to the chairman, Mr Mathuradas, and that is how the whole thing started rolling.

ML: At that stage, when you were looking to be attached to a hospital, why did you not consider Escorts with Dr Naresh Trehan?

RP: At that time, I had a dream but no money. So I had to join some hospital whether it was at Bangalore, Delhi or Mumbai.  Yes, I know Naresh, but I also knew I would not be able to grow there. So in 1993 I started practising at Jaslok and, after a few months, at Breach Candy Hospital. My experience at Cleveland helped, because the technology and expertise was 10 years ahead of other places. I started doing the most risky cases. My first five or six cases were those of patients that nobody wanted to touch. All of them survived and that created an impression; there has been no looking back since. One case I remember was that of a senior IAS officer – he is still alive. He had a major cardiac arrest and his heart stopped beating for 20 minutes. He needed an angioplasty and most of the other surgeons refused. At that time, I had just come back from the US and had no case. So when the family asked me, I said I will take the case provided you don’t sue me. He was saved and I remember I was by their side for almost two months. A few cases like that established my reputation.

I was still looking for a place, since my dream was this hospital. My NRI friend and I started looking for a plot, even though I had no money, no car and no place to stay. I have probably looked at every single piece of land in Mumbai -- from Cuffe Parade to Panvel -- you name it and I have seen it. If I found a good location, the title was not clear; and I was getting frustrated. I used to talk to my boss at Cleveland and he said, ‘why are you rotting there, why don’t you come back?’ I told him, ‘I will try for a few more years and if I still don’t get what I want, I will come back (to the US)’. Meanwhile, my career had zoomed professionally.

I almost finalised a place near INORBIT Mall. But one of my very close friends, Mr M.R. Chandurkar, chairman of IPCA Laboratories, said: ‘nothing doing, we will find you a better place’. Then we got to know about a plot of land at the Bandra-Kurla Complex under the Mumbai Metropolitan Regional Development Authority (MMRDA), which was soon advertised.

ML: This was during the first round of auctions and not very expensive?

RP: It was not very expensive and nobody wanted to come here, since it was not a residential area. My friends said I was mad, but I said, I am not looking at the present; I am looking 10 years ahead. Believe it or not, I didn’t have even Rs30 lakh, out of the Rs60 lakh that we had to pay as a deposit. So we begged and borrowed from friends and put up the money.  

ML: You also gave a lot of thought to the capital structure and hospital design, didn’t you?

RP: Yes, that model and thought process came from the Cleveland Clinic. My entire infrastructure and management technique came from the Cleveland Hospital. I also got involved in helping others to get some experience in hospital design and architecture. I read a lot; my cupboard is full of books on hospital architecture, design, layout of the ICCU (intensive cardiac care unit) and the OT (operation theatre). In fact, I now know more about OT and ICCU design than anybody else in the country. The owner of Lilavati Hospital is a good friend of mine, so I helped design their entire first floor. I was also involved with designing seven or eight other hospitals around the country, including Medicity in Hyderabad. I basically incorporated whatever I saw in Cleveland over here. For instance, the doctors’ consulting room, the operation theatre and the ICCU have to be as close to one another as possible because, in an emergency, you need to attend to a patient within seconds. In India, you will find that the doctor’s office is on one floor, the OT is on another floor and the ICCU is on some other floor; you lose patients before the doctor can reach them. In my hospital, the OT and CathLab are only 15 feet away. I can transfer a patient from one to the other in 10 seconds and it can make the difference between life and death. I learnt a lot from other people’s problems.

ML: What kind of problems?

RP: For instance, about raising finances. We decided to have at least 80% of the money in place before starting the construction. I delayed the project by six months to get the finances and spent a lot of time with the architects and consultants, designing and planning everything on paper. My brief to them was: you can break a wall 10 times on paper. But, once you build, I am not going to allow any breakage.

ML: How did you organise the funding?

RP: A lot of my family members and friends chipped in; they are all equity holders. And yes, I raised money from relatives of my patients and colleagues. I also looked for a bank loan, which was very tough to come by then. Healthcare was considered a useless industry those days and the Industrial Development Bank of India (IDBI) had lost Rs1,800 crore. I went to IDBI; luckily I had happened to operate on one Mr MS Verma who was then the chairman of the State Bank of India. We became close friends and I requested him to help me – he also happens to be our chairman now. So Mr Verma spoke to the IDBI chairman Mr GP Gupta. I clearly remember that five of us had gone to meet them and one of the directors said “you guys don’t know sand from cement; how are going to complete this hospital project in 18 months?” He said it would take five years to complete. Mr Verma pushed the case with Mr Gupta and they agreed to give me the loan. While the negotiation was going on, I happened to operate on the then Bank of India chairman, KV Krishnamurthy. He had already undergone two bypass surgeries and everybody had said he was inoperable. I agreed to do the surgery. It took 16 to 18 hours and he came out of it successfully and is doing well. He said, ‘doctor, what can I do for you’? I told him about my dream and that no bank was willing to lend money to a hospital and that I had no collateral. He single-handedly took up my case and convinced the board to give me money. He also roped in Mr Leeladhar (then chairman of Union Bank of India). I decided not to borrow from IDBI but to go to BOI instead; I had a good rapport with them and they would be a little merciful, if we had repayment problems. That is how we started construction. I had a very strict schedule with all my contractors – they were eligible for a bonus if the work was done before time and had to pay a penalty for every day of delay. I had a target of 18 months to complete the project. It was a really crazy schedule; I was working for almost 22 hours a day, seven days a week, and I was sleeping for only two hours a day.

ML: The work on the hospital started in 2003?

RP: No, the work started in May 2001. I had a target of completing the work in 18 months and was driving everybody nuts. Luckily, my brother-in-law was the president of ABB (in charge of Far East) in Singapore. He had come back to start his own manufacturing firm for exports. But 9/11 (New York bombing) happened and everything was in a state of flux for a while. So I said, ‘why don’t you come over and help me?’ That was a great help; he also worked 14 to 16 hours a day. I would have finished the project in 14 months except that the air-conditioning experts goofed up and forced us to re-do a lot of work. We finally finished in 19 months and started paying the banks one and a half years in advance.

ML: How big was the project?

RP: When MMRDA allotted the land, they gave all the available plots to others and the remaining one was given to the hospital. It had a zigzag shape and we could not have constructed a hospital. The police had an equally bad plot of land adjacent to ours. So I went to the Mumbai police commissioner M.N. Singh and said, ‘your land is just as bad; can we merge it and divide it so that we have better plots?’ He agreed. Mr Ajit Warty was the MMRDA commissioner then; he was extremely helpful and agreed to let us merge the plots and re-do the boundaries. I initially met Mr Warty to apply for the land. He laughed at my wanting a plot, but when I then told him about my dream, he said, “Doctor, go home and rest. When the plot is advertised, make sure you are the highest bidder”. We did that and got the land.

ML: Didn’t MMRDA have reservation for a hospital in their plans?

RP: Yes, but nobody wanted to come here, so there were only 10 or 12 bidders. My plan was to construct on a smaller scale because I did not have that kind of money; and then do the second phase after 10 years. That was not possible, so we decided to complete the entire civil work; we also reduced the project cost from Rs112 crore to Rs95 crore. We put our own money into the construction first and also did a lot of tax management. We took the bank loan only at the end so as to reduce our interest burden; and also so that they would have no reservations about lending us money.

ML: Who was advising you on financial matters?

RP: Nobody. Our inauguration was also novel; we called three religious heads – the Kanchi Shankaracharya, the Archbishop and a Muslim leader. My boss from Cleveland, Dr Loop, flew down from the US and inaugurated the Asian Heart Hospital.

I must tell you another interesting episode. When we were planning the construction, our interior designers and architects kept comparing what I was doing with Jaslok and Lilavati. Finally, I got really mad and said I am trying to build a modern hospital. I then took a team of them to the US and showed them what the hospitals there look like. We went to Detroit, Chicago and Cleveland Clinic and I sought permission to let them take over 5,000 pictures. I also had a minimum brief – there was to be no black, brown or grey colour in this Hospital.

There is another interesting story on design. HOSMAC was our local hospital architect. During design phase, I talked to my boss Dr Loop. He got in one of the best from Cornell, NBBJ – the largest firm of hospital architects in the US. Cleveland Clinic had done more than $5 billion worth of business with them. Their chief architect told me ‘your boss has asked me to help you; I have no choice’. Over the next five days, they whetted my plans and gave a lot of suggestions.  

As I said, I have gone into the minutest details of the hospital. On the quality side, I put in strict protocols and gathered a core team of people who were hard-working and totally dedicated. I have a surgical team that is very good. My anaesthetist is the best in town; my intensivist, Dr D’silva, is probably the best in the country -- and their hallmark is that, like me, they work 14 to 16 hours a day.

ML: How do you manage to keep people enthused and retain them?

RP: Yes, it is tough, especially in Mumbai. The Indian mindset is not used to working in world-class conditions and that’s the reason why the turnover rate (attrition) is pretty high here. But my core group, which is the basic structure on which my hospital depends, is there. Within six months of commencement, we were doing the toughest procedures. But the turnover rate is high. Once people get the Asian Heart brand name, they are paid twice or thrice the salary, since there is a tremendous shortage of trained people. But my core group has not changed. They are loyal to me.

ML: Tell us a little about your work in surgery. We learn that you have the safest hands in operations with the highest success rate.

RP: Yes, my surgical failure rate, on an average, in the last seven or eight years is 0.5%, while the US average is 2% to 3%. I still spend around 10-12 hours out of my 16-18-hour working day on my clinical practice. That is close to my heart. I still do the highest number of most difficult cases around the country and I don’t want to give that up. I have done over 10,000 operations till date; even tomorrow, I have six to eight heart operations. It is only on weekends that I catch up with research and other work.

ML: What are the major differences between the US and India as far as the work is concerned?

RP: The major difference here is that patients have tremendous respect for you; in the US, it is like I have paid you money, you have to do your job. The patients’ expectation level in India is very low and their appreciation is what can make you go on for 16 hours. The problem is the work culture. Bringing people to their highest standards and getting them to keep at it day in and day out is very tough. They are not used to it. Half the staff is from the slums; so training them to be very clean and courteous for half the day and then sending them back to a totally different reality is difficult. So we have constant training and supervision.

ML: Collectively, how much stake do the doctors hold in Asian Heart Hospital?

RP: All the senior doctors have a stake; collectively, we hold around 70%. I made sure that doctors hold more than 50% because, if it is a question of choosing between quality and cost, we will choose quality; a pure businessman is not going to like that. If a doctor comes tomorrow and wants certain equipment because it is important, I would immediately say yes; while if it is a management decision, they will ask for a business plan and repayment ability, etc. We don’t compromise on quality issues. That’s why ours is the only hospital in the country that has both ISO certification and JCI (Joint Commission International) certification – no other hospital has both. I have insisted on certification right from the beginning. You have standard processes for everything in industry; but a hospital, which is one industry where you are dealing with human lives, has no standardisation. I am among the first in India to push for standardisation in the whole industry. JCIR is for standardisation of the care processes; it is a tough US-based accreditation. ISO mostly looks after the back-of-the-house processes. Then we went for an NIAHO (National Institute for the Accreditation of Healthcare Organizations) accreditation, another accreditation which is basically a combination of both ISO and JCI standards.

ML: In terms of medical techniques, how do you keep up with developments?

RP: In terms of medical equipment and technology, the competition among the good hospitals is such that everybody gets it immediately. Even techniques -- what you learn today, everybody knows tomorrow morning. The difference between a good hospital and an average hospital lies in how it uses the technology to provide better services and that is where we score better than any other hospital. No other hospital in the country can match our workspace, our ICCU care, our inspections or appraisals. That is where, I think, very strong systems and processes and a core group of doctors to deliver results on the surgical side and the intensive care side have made a difference.

ML: What next, any expansion plans?

RP: Yes, we had planned the second phase in 10 years but we are now doing it in five. We are going to add another 150 beds; after that, we have other expansion plans. We have already identified four places for expansion in the next two years -- one of them will definitely be my home town Bhubaneshwar, where we have already got the land from the Orissa government. I will start construction by December 2007. My long-term dream is to start a medical college in the next 10 years; again with quality as the focus.

ML: There is a lot of talk of medical tourism; do you see that developing in a big way?

RP: Right now, we are catering to people from the Middle East and the NRI population from around the world. Getting people from the USA is a little tough mainly because of the distance. Travel for 18 hours is tough and perception about India is also an issue but it is changing rapidly. If we can target the 30% of the population that is not insured in the US, if we can tap those, it may work.

ML: What about the NHS backlog in the UK? Can’t we get those patients?

RP: I was part of the Prime Minister’s delegation that went to the UK last October. We were told it is a sensitive issue: don’t even raise it in this forum. The problem is the European Union law that says that no patient can travel more than four hours for treatment. So India gets excluded. We still get a few patients. Last year, we got 10 patients, of whom six were Indians. These aren’t big numbers. In the US, the insurers are offering substantially lower health insurance premium and other financial incentives for those willing to be treated outside -- in countries like India, Thailand or Singapore. They pay the airfare and cash allowance. What people forget is that Malaysia, Singapore and Thailand are far ahead of us in terms of infrastructure. There is a hospital in Thailand, called Bumrungrad Hospital, which treated 65,000 Americans last year. A single hospital gets more patients from overseas than all of India; and the infrastructure, hospitality and customer service is really unbelievable. It will take some time for India to catch up with them. I take some credit that, with Asian Heart Institute, I am somewhat closer to them.

ML: Do you have plans to go public and get listed?

RP: Yes, somewhere down the line; but right now, we want to expand and finish paying off our Rs65 crore loan.

ML: How much will it cost to set up a new hospital today?

It depends. I will not spend so much on interiors. The basic thumb rule for hospital beds is Rs30 to Rs40 lakh per bed. If you are doing a 100-bed hospital, it should ideally be Rs30 crore or a maximum Rs40 crore; beyond that, breakeven becomes tough. But I never looked at economics while building Asian Heart – this is my dream project, which I have built from my heart. Otherwise, do you think I would have had an office like this? Lots of people tell me there is wastage in terms of space. But I say two things: I did it from my heart and I did not look at economics. Besides, I have seen every hospital in Mumbai. Once you are successful and have the money, you want to provide ambience and services, but you have construction restraints and cannot do anything about it. So, I wanted flexibility right from the start.

ML: How much was your cost per bed here?

RP: Very high, around Rs80 lakh. Normally, this would not have been viable; the reason it worked is that my partners and I already had a successful practice in Mumbai and could transfer that here immediately. We have 80% occupancy.

ML: Can you tell us about your Bhubaneshwar project?

RP: My father came here three years ago. He said I will give you some advice. I asked what? He said, “Are you going to take all the money when you go up (die)? You are not from here (Mumbai); why don’t you do something for Bhubaneshwar?” I said okay, I will do something, and I approached the chief minister (Naveen Patnaik). He was very helpful; he is going out of the way to help me. I have got half of the land now, the other half was under litigation, but I will get it by December.

ML: You have an unusual honour among doctors for being among the highest taxpayers…

RP: : It is a funny thing; I always took my fees in cheque, even in 1996 when it was not usual. So my first CA asked me, ‘Doctor, what is your cash income?’ I told him this is all the income I have; there is no cash income. He told me that nobody would believe it and that I should better start taking cash because the income-tax officials won’t believe it either and will claim that you earn thrice as much. I said, ‘okay let them come and check my house, if they want to rip up my sofa to look for cash, I don’t mind.’ That’s when I had come back to India; and, from day one, I have been taking only cheque payments and the tax authorities gave me the highest taxpayer award in 1996.

ML: Tell us about your plans for a medical college?

RP:  I would love to do it in Mumbai – the city has given me so much. I never imagined that I will land up in Mumbai. In retrospect, I don’t think I could have achieved what I have, had I not been in Mumbai. What I like about this place is that it doesn’t matter where you come from; it is what you do that counts.

ML: When you are expanding, how will you ensure the highest standards?

RP: I am creating a core team that will fly down for critically ill patients. But that is never more than 10%. Over 80% of the work is routine and that can be handled by local doctors. I have given up attending to the day-to-day administration. I am no longer the CEO. I just have a weekly management meeting. I have also created a quality team that continuously monitors quality in all sections and gives me a report. We have a management council where we have taken six managers who, between them, take all key decisions. So everything is decentralised and I plan to follow this model everywhere. The future of healthcare is not in nice interiors or in new concepts in hospital design but in higher standards of patient care. Those are the areas, I think, I have contributed to.




10 months ago

I just happened to send him a mail asking a few queries on my sister condition. After sometime I got a call from this Great Man, he explained me all the queries I had.
Thank you sir.


10 months ago

I would like to thank him, I just dropped a mail informing him about my sister condition and I get a call on my cell and the great person was online. Spent sometime explaining my sister condition.

shalini shah

2 years ago

it is very sad to know that the promising doctor of yesterday has turned totally into a businessman of what he cares about is business only, patients' interest are no more the priority now....
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“I have tried to create a world to protect others’ risks – that too through systems and design”

Dr RH Patil narrates the innovations and battles behind the setting up of the National Stock Exchange

Ask anyone who was the moving force behind setting up the National Stock Exchange (NSE) and few will mention Dr RH Patil’s name. Yet, it is one of the largest in the world and valued at Rs18,000 crore within 13 years of operations. Ask what has he gone on to do after leaving NSE and only gilt market players would have an answer. Well, Dr Patil has quietly created another path-breaking, world-class institution that will change the way gilts and their derivatives are traded globally. That is the kind of person Dr Patil is – unassuming but fiercely competitive; intensely focused on the cause of the institution he works for; remarkably entrepreneurial but totally ethical; an institution-builder but only of the public-service variety. He belongs to a rare category – serial institutional-entrepreneur. India needs people like Dr Patil as much as it needs the Ambanis and Narayana Murthys. Why is this person not a Padma Vibhushan, we wonder? Dr Patil narrates his uneventful initial career, the innovations and battles that made NSE possible and the quiet but revolutionary work he is doing today

ML: Can we start with your childhood and where you studied?

I was born in a small town called Nandgad in Belgaum district of Karnataka. My father was a landlord. I completed my matriculation there and then went to study at Karnataka College in Dharwad between 1955 and 1957. I then got bored with Dharwad and shifted to Pune’s Fergusson College. I had scored well in SSC. Everybody said I should go in for medicine or engineering, but I wanted to be different. I thought medicine meant cutting bodies and, being a vegetarian, that didn’t appeal to me. Engineering meant working in a factory or field sites. I didn’t want that either. At the pre-graduate level, I opted for economics, which I liked very much and chose sociology as my second subject. After graduating, I wanted to join the best school in economics, which was the Bombay School of Economics those days. That is how I came to Bombay.

ML: Had you decided on a career plan then?

It seems strange, but I have never planned for the long term. I take life as it comes -- try to make the right choice and let events take their course. I got a first class in my MA Economics, so the next step was to do PhD, which I did in international economics. Those days, a job at the Reserve Bank of India (RBI) was the coveted place for economists. After completing my doctorate, I remained with the Bombay University for a while and then joined RBI and was there until June 1975. When I was 38 years old, I shifted to IDBI (Industrial Development Bank of India), which was then owned by RBI.

ML: What was your portfolio in RBI?

I was in the international trade division for the first two years. I worked with S.S.Tarapore (former deputy governor). I was later transferred to the international finance division, which used to look after RBI’s relations with IMF (International Monetary Fund) and the World Bank. That was the time when the dollar went off the gold peg. India was a member of the IMF’s “Committee of 20”, since we were one of the five important countries in IMF. Dr Manmohan Singh was the chief economic advisor to the Government of India those days and India’s representative on that committee; I was given additional responsibility of assisting him from RBI’s side.

ML: Did you have a specific career path in mind at IDBI?

I intended to remain on the research side. But after IDBI’s separation from RBI, the management decided to have a common cadre for all functions and I was shifted to areas like project finance and treasury. I worked in Chennai during 1989-1990, after which I was promoted as executive director in charge of treasury and later as head of project finance where I had to look after the loans portfolio. In those days, there used to be monthly inter-institutional meetings (IIMs) of the heads of all-India financial and investment institutions. Major policy issues as well as assistance to very large projects were discussed at the IIMs and my research department prepared the policy notes. I attended the IIMs even when the agenda had no policy issues; it gave me good perspective on evaluating loan requests, which helped me a lot later. When I was shifted to loan appraisals, many people said: “This fellow is an economist; he will be a disaster.” To their utter shock, I often knew the background of the project or the sector and could ask for a re-look.  In Chennai, they said I would not succeed because I had no experience of handling both personnel and operational matters; but in less than six months, the then chairman S.S. Nadkarni began to get messages about the way I handled things. He had his ways of finding out how his officers were doing. He would get feedback from industrialists.

ML: How did the decisio­­­­­­­n to start NSE come about?

After the Harshad Mehta scam in 1992, the government was groping in the dark about what to do…G.V. Ramakrishna was the SEBI chairman. The finance ministry had called a meeting and I only got to know what was to be discussed on reaching there. Montek (Ahluwalia, then finance secretary), Dr P.J. Nayak (then jt. secretary and now chairman, Axis Bank), Mr Ramakrishna, Mr Nadkarni (IDBI chairman) and I were present. The concept of NSE was born at that meeting. We wanted to do things differently. We discussed setting up a professional organisation with screen-based trading, a weekly settlement system, etc. We also decided not to give dominant shareholding to any single institution and capped it at a maximum of 14%. We later expanded the capital to bring in some new investors and reduced the maximum stake per institution to 12.5%. IDBI was entrusted with the job of setting up the Exchange and

Mr Nadkarni asked me to lead the initiative.

What was your brief? Was it to offer a serious competition to BSE?
RHP: No; more than serious competition, they said, let’s bring in a clean Exchange. It was not meant to be a shock to BSE. We were asked to create a professional Exchange and offer an efficient alternative. In fact, we at NSE didn’t have any great hope that it would become such a big entity; we only wanted to offer a better alternative.

ML: There was no example of a second Exchange having beaten the dominant Exchange anywhere in the world. How did you go about it?

Since we were totally new to this business, we decided to use experts who had the appropriate experience. We identified three such organisations -- PwC (PriceWaterhouseCoopers), Arthur Andersen and International Securities Consultancy Ltd. (ISC) based in UK and Hong Kong and asked them to submit proposals. We chose ISC since its fees were modest and it definitely had better ideas. ISC submitted a detailed proposal and sent a team, which worked closely with us for over two months on the detailed implementation plan.

ML: What was your team then?

The research department was under me already. Ravi Narain, with his MBA background, was part of the team and he chose three others to work on the project. We did not want to set up another local Exchange but a truly national one. The question was how to spread its reach across India. Satellite communication was the best option but nobody had used it to run an Exchange. I said ‘let’s try’. Frankly, many of the decisions that we took were bold decisions; it never occurred to us that some of them might not succeed.
ML: Whose idea was it to use satellite communications: yours or ISC’s?
RHP: ISC’s. Departmental stores and pharmacy chains had used this model in the US even in the 1990s. Any shop in a chain of medical stores could recall your entire medical record from the central database through a satellite link. The second big decision was whether to choose the BSE model of jobbers or direct matching of orders. We weighed the pros and cons and ultimately decided that the anonymous order matching system was the best, although many Exchanges then had a quote-driven system. We were a bit theoretical (laughs). We looked at markets that were the most efficient or competitive and how to bring their features into India. That is how we came up with the idea that we must not limit the number of brokers. We felt, “let as many people come.” We would only prescribe conditions. We also used the deposit concept rather than the sale of membership cards. If anyone felt dissatisfied, he could take back his money: there would be no entry barrier and no exit barrier for NSE membership. We realised that we cannot establish national exchanges in different cities; we needed a fully interlinked system, which alone could generate huge orders and encourage competition.

ML: Didn’t you anticipate opposition from the BSE (which was then not a national Exchange) and the 20 regional exchanges?

The government gave us the go-ahead to go national and BSE never thought that we would succeed. Also, in my desire to bring in more people, we never barred brokers from other exchanges. We said, traditional brokers are welcome but we will also encourage chartered accountants, bankers and other professionals to become brokers. When I toured the country, talking to people at other exchanges, they asked, “Why should we come to your Exchange at all”? Nobody took us seriously. They weren’t worried about us at all.

ML: From being an economist to becoming a development banker, you literally had to turn into an entrepreneur at the NSE. How could you make this transition rather late in your career?

At IDBI, I had done my own analysis about how and why entrepreneurs succeed. There is a lot of economic literature to show that companies that function on ethical principles succeed in the long run; companies that cut corners do not get financing after a while; and those who are well-meaning and focused, hire good professionals and delegate work to them. So, it was not all theoretical in my case (laughs). In any case, until I was handling project finance and vigilance, I did not have problems. But once I started receiving calls (to pressure him on loans - Editor), I wondered whether I was spending my time fruitfully in IDBI. Around then, Mr Nadkarni said, “Since you are in charge of the treasury and are dealing with shares and stocks, you are the right person to oversee the NSE project.” When I started interacting with the team and the consultants, I found the whole thing very interesting and challenging. Mr Nadkarni then told me that (S.H.) Khan would be the IDBI chairman after he retired and I would be number two in the organisation. I then said, “I want to move over to NSE.” The company had already been formed and I was a director on its board. He was shocked. He said, “People aspire for power and you are saying that you want to go to an entity which nobody is sure if it will succeed or not. Aren’t you taking too much of a risk?” I said, “Sometimes one should take the risk.” He said, “Are you sure you want to take a risk at this age?” I said, “It is only at this age that I can take the risk. Both of us -- my wife and I -- have been earning; we both lead very modest lives. We have decent savings. If we continue to live modestly, I can take that risk.” In fact, many people said that I was a fool. But my own feeling was that, once you retire from IDBI, who remembers you? So I decided that it does not matter whether or not I succeed in setting up NSE. My grandfather used to say, if you make a whistle out of a carrot, it is good if it plays; and if does not, you can always eat it (laughs).

ML: When did you formally move to NSE?

In July 1993. Mr Nadkarni and Mr Khan asked me to continue at IDBI for some time. I was released in mid-November 1993. At that time, NSE’s offices were still being done up and we worked out of makeshift tables and would eat in the lounge. Soon afterwards, we started recruiting -- mostly freshers. Only enthusiastic youngsters were attracted to the job: after all, the NSE was not a proven concept. In June 1994, we started trading in government securities and in November we started trading in equities.

ML: Did you have problems installing the V-SATs?

When we opted for the V-SAT model, the Department of Telecommunications (DoT) was very powerful and had a highly restrictive policy. H.P. Wagle was the DoT chairman and we were initially assured full support. But when we asked for the C-Band spectrum, they said: ‘no we can’t give you C-Band, because there is a lot of demand for it. We can give you extended C-Band,’ which nobody was using. We agreed but when we asked for a transponder, we were told that there was limited space on the transponder. It was a very funny attitude. When we were finally given one-fourth transponder, it was on a satellite that had already started wobbling. We then started looking for V-SAT equipment, which was not readily available for extended C-Band. Luckily, Shiv Nadar (founder, HCL Comnet) was in touch with Gilat from Israel, which had expertise in TDMA technology. But it did not have equipment for extended C-Band. They said, technically, it was not difficult to manufacture such equipment; with a bit of experimentation, they would design equipment for that frequency and test it in Israel itself. However, we were not fully aware of the problems and the risks involved. Such equipment and technology requires thorough testing in live conditions. Gilat was not a very large company, so the main contract of commissioning the satellite communication project was given to an American company - GE Spacenet. When all the heavy equipment landed at the Bombay Port, the Customs Department went on an indefinite strike and we had decided to start operations around Diwali!

ML: How did you get around that one?

The Argentine President, Carlos Menem had come to India and I was invited to a meeting that he was addressing. I met a senior customs official called Surjit Singh there -- a very nice gentleman. He asked me what I did and I told him about the NSE project. He was immediately interested. I told him about the strike and how it had affected us. He went back and told his officers that this was a project of national importance and so “even if there is a strike, we must help.” The equipment was deep inside the dock warehouse, at the farthest point from the entrance. Yet, he persuaded his staff to get it out and clear it. This is how people can come to your rescue if you are well-meaning. The equipment was then installed at Mahindra Towers (NSE’s first office) and we were waiting for DoT’s approval. They said, “no, you cannot set up the antenna here; it has to be set up in a place which is like a valley so that it does not interfere with telecom signals in the surrounding area.”

ML: Didn’t they say any of this before the installation of the antenna?

We did not seek their formal permission since they had already approved our proposed V-SAT system. There was another dimension to the problem. I don’t think they ever took us very seriously. They were, perhaps, under the impression that we will not be able to operationalise such a complex project as no other satellite-based communication system of that sophistication had gone live in India until then. DoT itself was planning to set up 70-80 V-SATs as a commercial proposition on the extended C-Band, but it was stuck in a dispute with the equipment supplier. They were obviously keen that their project goes live before our project. Dr Manmohan Singh was highly supportive and was keen that the NSE project got implemented as early as possible. He had told Dr P.J. Nayak to use his name if the project got stuck in any government department and that was of great help to us. We told DoT that Dr Singh had given us the mandate to go live by Diwali of 1994; they then grudgingly gave us a temporary approval to start, on the condition that we would have to shift the mother-dish antenna to the outskirts of Pune if our system interfered with any other telecom network. But everything worked fine. We were also lucky that our extended C-Band system worked. Since we were in a hurry, it was not thoroughly tested before it went live. We were also not fully aware of the complexity of the communication system we had installed. Sometimes ignorance is bliss! It was almost a miracle that our V-SAT system did not face any glitches. It convinces me that if you are well-intentioned and are not doing things selfishly for yourself, there is a higher force up there that helps you. In the first few months, there was hardly any trade happening. It was about Rs6-8 crore per day in the equities segment. The same was the story on the debt side.

ML: In fact, you started with debt trading.

Yes, that created a wrong impression that NSE was being set up mainly as an Exchange for trading in debt instruments. But we had always said that this is the only Exchange where all financial products would be available for trading -- government debt, corporate debt, equities, and all types of derivatives. There was a strong logic to why we commenced our operations with government debt. All the players in the G-Sec market -- brokers as well as institutional treasuries -- are located in Mumbai and we did not have to wait for satellite communications. We, therefore, opted for leased lines for that phase. There too we had to struggle with MTNL to complete the work fast.

ML: You started with debt trading and volumes were not picking up, what was the turning point?

Well, Mr Nadkarni used to ask: “when are you going to cross double digits?” Sadly, he (Nadkarni) died before he could see us reach that figure. Sometime around February or March 1995, trading started to pick up and in May it spurted. Everyone was watching whether we would be able to complete our settlements on time and with minimum problems. When everything worked fine, week after week, people were slowly convinced that it was safe to start trading on the NSE.

ML: Issues like signature mismatch on paper-based transactions that slowed delivery and settlement were also a learning experience for you...

RHP: Those issues became serious a little later when volumes increased rapidly. Initially, the issue was whether the system would work without a glitch. Then, somewhere around May, we noticed that the transactions in actively-traded BSE scrips would pick up momentum on the BSE only after NSE opened for trading. Thus, NSE became the price setter and more volumes started flowing into NSE. 

Before October-end, our volumes surpassed those of BSE. Then, delivery of fake certificates and forged documents became our biggest problem. We sent our officers to the shares department of companies and registrar and transfer agents (R&T) to detect fake certificates. We soon realised that we could not rely only on our staff. So we requested R&T agents to depute some people to NSE to help us. At one stage, almost 40 people were engaged in detecting fake certificates before accepting shares for settlement.

As the volume of trading increased exponentially and spread across India, there was another problem. Brokers found it expensive to send share certificates for settlement on their own account. This led to delays. So we began accepting share certificates along with the transfer deeds in three other metros -- Kolkata, New Delhi and Chennai -- and we brought them to Bombay by plane. At one stage, about four tonnes of paper used to come to Bombay every week to be sorted and sent back.

ML: At your cost?

Yes. But our transaction charges were higher than BSE’s. Brokers did not mind paying slightly higher charges because they were getting cleaner shares due to our effort; besides, we also offered them a settlement guarantee. (NSE was the first to introduce a settlement guarantee). We borrowed the settlement guarantee concept from the futures exchanges in currencies and commodities, especially in Chicago.

ML: Why did you decide on a for-profit stock exchange and when did NSE start making money?

Membership deposits were non-interest bearing for the members, so we earned a lot of interest on those. In fact, interest income was so good that later, when volumes grew, we started reducing the transaction charges. While other exchanges were built on government concessions, Mr Nadkarni said, “You must prove that you don’t need any subsidy from anybody. If you are commercially viable, you will succeed.” We never expected that NSE would become such a large institution and generate so much profit.

ML: What was the tipping point? After all, even institutions were not trading on NSE for a long time.

Yes. Even after becoming the largest Exchange of the country, even our promoter institutions did not trade on NSE! Their position almost was, “we have given you money to start an Exchange, now you go survive on your own strength. We will trade only on BSE.” We had to lobby with them to start transferring at least small amounts of business to NSE. In fact, the slowest to start doing business on NSE was UTI, the largest institution. Dr S.A. Dave (then chairman of UTI) said that he would not pressure his managers. He did not know that some of the staff had a nexus with brokers.

ML: This is the exact opposite of BSE’s frequent allegation that NSE had an unfair advantage because of its institutional parentage.

Not only Indian institutions but even foreign institutions were giving
NSE the short shrift. Two dealing officers of a major FII even alleged that information was being leaked from the NSE. The most shocking thing was that our policy was to maintain secrecy; BSE had no explicit policy on this at that time. Two dealers of one FII had even persuaded their bosses to take up the issue with finance minister P. Chidambaram when he was in the US. Very interestingly, these two were later sacked for colluding with brokers. In fact, at that time, the automated trading system and depth of the order book position made manipulation through synchronised trading almost impossible. But we were asked to tighten the security measures even further. In another interesting case, the CEO of a large foreign brokerage firm complained to us about leakage of information about their trades. A thorough scrutiny of all possible sources of leakage revealed that their telephone lines were being tapped while receiving overseas orders!

ML: We remember that even getting your stock quotes in the papers was a problem.

Yes, in fact you were the first to start putting our quotes in a national daily (this was when Sucheta was financial editor of the Times of India). Business Line also used to give us prominence. Thereafter the others started publishing NSE quotes, but that too very grudgingly. Despite the fact that NSE is the third largest stock exchange in the world and way ahead of BSE in every area, Indian pink papers write as if BSE is the only Exchange that matters. Is this indicative of the level of market ignorance or a bias, which has been consciously perpetrated by some vested interests?

ML: After NSE took off, you set up the National Securities Clearing Corporation Ltd. (NSCCL).

Yes. We felt the need to guarantee the trades. As you know, clearing and settlement with guarantee is a commercial activity. In the process of offering this guarantee, the Exchange can go bankrupt, if markets turn volatile and there isn’t enough money in the guarantee fund. It would be disastrous for a public institution like the stock exchange to go bankrupt; that is why we created NSCCL as a separate entity. Later, when the problem of fake certificates began to hit us in a big way, we realised that we can’t go on like this and had to move towards paperless trading through a depository. In 1995, we set up the NSCCL; and in 1996 the National Securities Depository Limited (NSDL) became operational.

ML: The NSDL took off very smoothly didn’t it?

Yes; but there were vested interests that opposed the depository idea too. People in share transfer departments used to run a racket in re-selling stamps attached to transfer deeds. The badla lobby was also opposed to the depository. The very survival of badla depended on physical share certificates, since shares deposited with the badla financiers were being delivered back into the market, etc. Once settlements moved to the depository mode, badla -- at least the cream in badla -- would disappear (badla is the interest charged to carry forward transactions). The same lobby also opposed rolling settlement, since shorter cycles would kill their financing. Fortunately, the government exerted a lot of pressure to move to paperless trading and that did help. Rolling settlements were next on the agenda to eliminate settlement risk inherent in the earlier system. Later, derivatives trading was launched.

ML: In retrospect, NSE was just a phase in your career. You have since gone on to build another hugely successful institution - the CCIL (Clearing Corporation of India Ltd). Did you leave the NSE because your term was over, or you didn’t want to go on?

I follow one simple principle -- when it comes to myself, I will not ask for anything. I never asked for an extension of tenure. We already had a succession plan in place because I sincerely believe that the institution should not suffer when you leave. I also believe that you should not project yourself, but project the institution for which you are working. The moment you start projecting yourself, you are more likely to start doing things for your personal publicity rather than for the institution.

ML: How did CCIL happen?

At the NSE, we were in regular touch with RBI and needed their support at all times. Before retiring, I had called on Dr Venugopal Reddy, who was then the deputy governor, and told him that I was retiring. He laughed and said, “Good, good; this work is waiting for you, you must take it.”

I used to be in the steering group for setting up the CCIL. The idea had been around for years, but nobody was willing to bell the cat. You require some entrepreneurial spirit and if things go wrong you should be willing to receive brickbats also. Given my experience in the setting up of NSE, I was asked to take over the responsibility. Luckily, I didn’t face the kind of protests that I had faced in NSE.

Here too, so much had to be done. Primary dealers (PDs) and bank treasuries worked until midnight to settle transactions. The RBI could not take up transactions in a sequence; if there was no cash in your account at the time the transaction was processed, it would be kept aside until credit was available in your account. If people forgot to sign the SGL form correctly, they called you to the RBI office to sign it. All this caused delays and gridlocks, which disappeared once we started netting and clearing G-Sec transactions.

CCIL was set up in May 2001 to address these issues and by February next year, we started clearing and settlement of G-Secs. Simultaneously, we were developing the foreign exchange (forex) clearing and settlement software. This is a unique experiment globally. Nowhere in the world is there a central counterparty for ensuring guaranteed clearing and settlement of inter-bank forex transactions. The clearing mechanism here is very different. Usually, a big bank acts as a counterparty for the settlement, but does it on a transaction-by-transaction basis. When there is no money in the account, that transaction is set aside for later settlement or settled only to the extent of pre-decided counterparty credit limits; there is no concept of netting and clearing. For example, HSBC does it in Hong Kong, while the CLS Bank does this globally. Nobody does it with a central counterparty clearing institution like we do in India today. This is cost-efficient and saves a lot of work for the member banks. Netting of trades reduces your financial obligations on an average by 90% on both sides -- for rupee or forex. So your liquidity requirements are smaller. The other problem was - when a rupee is bought or dollar sold, the rupee transactions are settled in the RBI, while the dollar transactions are settled through the nostro accounts of banks. Banks had the horrendous task of maintaining reconciliation of thousands of forex transactions as they were being settled individually.

When we set up CCIL, I was shocked to see that un-reconciled transactions were pending for a year or more with some banks. Today, they are settled with us on a daily basis. Foreign banks used to charge $4 per transaction for deals routed through their nostro account, while we charged Rs100 per transaction from the very beginning. They dispensed with several peons who used to run between banks with cheques for reconciliation. Each bank must have saved almost 80% of what they used to spend for settlement of forex deals. On 26 July 2005, when there was the deluge in Mumbai, banks could not function but our clearing mechanism functioned normally.

ML: What is the risk involved in netting and how has CCIL impacted transaction volumes?

Basically, there has to be a central counterparty to do it. You must also have the entire risk management mechanism in place, right from the margining system and follow-up. It requires a separate, highly efficient and well-funded institutional mechanism. When we came on the scene, forex transactions used to aggregate $1.5-$2 billion. Today, the daily average is $10 billion. Our month-end figures are sometimes $45-$50 billion on a single day because all the forwards are clubbed.

ML: What else has CCIL done?

Before CCIL came in, there were two money market instruments used to borrow/lend money - repo and call money. We have introduced a brand new instrument which is unique to the world - the Collateralised Borrowing and Lending Obligation (CBLO). It is a repo instrument that is traded on the automated screen. We monitor all CBLO transactions on a real-time basis to contain market risks. The daily CBLO volume is well above Rs30,000 crore -- more than the typical daily combined volume of repo and call money transactions.

The CBLO screen helps traders to have a continuous assessment of the overall money market on a real-time basis. Recently, we have created a trading screen for call money transactions as well. Again, there is no compulsion to trade on this screen. We have only a facility to trade at the click of a button. Nearly 80% of the call money transactions are now happening on the screen and people have started getting addicted to this screen.

ML: Things are smooth today, but there was a lot of anguish and heartburn when CCIL put brokers out of the gilt market, isn’t it? There is a feeling that even though you have set up NSE, you don’t like brokers.

(Laughs). The broker community has benefited immensely after NSE, NSCCL and NSDL came on the scene. People now feel proud about the efficiency of our capital markets, yet they call me broker un-friendly! Interestingly, I had requested the very same brokers, to start putting at least small trades on NSE’s wholesale debt market screen. They refused. Why? Because they didn’t like transparency. That is the real problem. Sucheta had exposed how HomeTrade (a high profile brokerage company that went bust) cheated several cooperative banks and minted money because of this non-transparency. Cooperative banks remain the favourite dumping ground in the money market.

ML: Are you saying that once there is a transparent screen anybody can trade without brokers?

Earlier, BSE also used to claim a better understanding of the market, but front-running and all kinds of malpractices were rampant. They created problems for themselves. If the broker-managed BSE had functioned well, would NSE have come up? If you do rampant daylight robbery, there is bound to be some reaction.

ML: Now that they are out of the system and you are innovating and introducing new products… all this would not have happened if brokers were around, right?

Yes, it would not have happened. CBLO certainly would not have happened. Under CBLO, whoever wants to be a borrower has to compulsorily deposit government securities with us. If he deposits Rs100 crore, we give borrowing limits up to a point. He can then trade freely with no risk to the lender because we guarantee settlements. The call money market requires you to take counterparty risk without security. In the CBLO, we hold the security and guarantee settlement. Cooperative banks are the biggest beneficiaries of CBLO, because until it arrived, they were almost untouchables -- nobody wanted the risk of dealing with them. Now, once they have borrowing limits, they get the best, market-based prices.

The CBLO has brought everybody on par. There is nothing like a more influential or more creditworthy trader. But the purpose was also to collateralise the market. In short, nobody should be allowed to borrow beyond his credit limits and anyone can borrow if they can provide security.  Banks cannot lose because of large lending/borrowing in a collateralised money market. It is a safe market and you come here if you want the best prices. In the olden days, when the giant State Bank entered the market to borrow, rates used to go haywire. On the anonymous screen, SBI can do any amount of borrowing/lending and the market will not move.

ML: What happened to the Patil Committee report on debt market that has not been implemented for more than two years? Is it lack of will or vested interests?

SEBI has to answer that. In fact, it is not that the potential of this market is small. Currently, fresh issues of privately-placed corporate debt are in the region of Rs80,000 - Rs90,000 crore a year. So, the reforms have to begin with primary issue regulations as also listing guidelines so that there is an incentive to do away with private placement of corporate debt and it becomes exchange-traded like equity. Debt requires a different set of listing guidelines.

As they say, one has to begin at the beginning. Reform has to begin with primary market regulation governing corporate debt. All over the world, there are good reasons why debt is an institutional market; in equity, there are possibilities of huge appreciation but in debt, the upside is capped while the downside is enormous because the issuing company can go bankrupt. So, most individual investors do not want to invest in corporate debt. I feel there is a lack of appreciation of the quality and structure of debt markets among policy-makers.

ML: What about currency futures? Will RBI set up the currency futures market or will they be under equity or commodity regulators?

The reason why I am in favour of RBI as the regulator in this area is that exchange rate management is the statutory responsibility of RBI. You can’t entrust that regulation to somebody else. I don’t think currency futures can be under the commodity markets. In the US, it happened because of a historical accident. A regulator who does not have full understanding of a market will find it difficult to regulate it efficiently and I don’t think the commodity fellows understand currency markets as well as RBI.{break}

ML: Will RBI then set up the currency futures market?

I have deliberately kept away from what is happening in this area. I don’t want someone to allege that I’m trying to influence RBI to get it under CCIL. Moreover, our hands are now full. We are actively working on a platform for OTC derivatives contracts -- interest rates futures, futures rate contracts and options, etc. It is really strange that, even in the US, the OTC markets are not properly monitored/regulated. For instance, a contract is legally binding only when confirmations are exchanged. I am told that confirmations of OTC derivative trades are sometimes delayed for months. The market is working purely on trust. It appears to be a worldwide problem. The New York Fed President has taken up this area for action. The other real problem is that everybody is entering into contracts, but nobody knows the sum total of risk of all such transactions on a near real-time basis to monitor counterparty risks. There is no daily “mark-to-market” even in many developed countries. So we are soon launching a platform where all RBI regulated entities will mandatorily report all the trades. We will process this information and inform each participating bank about their respective counterparty risks in interest rate futures. The first phase will be launched soon. RBI has also asked us to automate the auction platform for T-bills and dated government securities. We are also developing a screen-based dealing system for repo trades which are currently executed on telephone.

ML: As someone who creates new markets, where do you invest your money?

In RBI bonds and in mutual funds - there too I invest in FMPs - so no risks. You need a different mindset to take risks. I prefer to devote my limited energies to do things that are more productive, especially from a social point of view. I have tried to create a world to protect others’ risks -- (laughs a lot) - that too through systems and design. Remember, systems and design only. After all, what are margins? They are walls so that the speculators don’t jump into the sea.

ML: Does it ever excite you to create exotic products like weather futures…?

I would like to do more mundane things. Quite frankly, I am greatly influenced by the saying of that great economist, Joseph Schumpeter, quoted by Peter Drucker. He said; “Ultimately I have realised that things that improve the quality of life are far more important than all our intellectual speculation.” I would go by that. I wouldn’t like to get into areas that have little immediate practical value.

ML: You are very aggressive when it comes to growth and defending your position - both at NSE and CCIL. Where does that streak of aggression come from?

(Ponders) You want to be doing something all the while and you don­­t want to be left behind tomorrow.



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