M. Damodaran, former chairman of the Securities and Exchange Board of India, on the positive and negative of the Indian business climate

A worthy mention must also be made of his memory. It is, well, worthy of a financial guru that he is. The Chief Representative (India) for the ING Group of Netherlands, Head of IDBI, a development finance institution (which he converted to a bank), Damodaran has been the Chairperson of Unit Trust of India—then India’s largest mutual fund from July 2001 to December 2004—as well. Recently, the former civil servant turned entrepreneur with Glocal Medicare, a medical services provider. Damodaran’s journey began differently. Admitting that it was “a really long time ago” Damodaran effortlessly gave us a detailed (precise) description of the major milestones in his life. “I was born in the Palakkad district of Kerala. In 1956, during linguistic reorganisation of states, my father opted for what was then Madras. I studied in Coimbatore. The longest and most significant portion of my school days were spent in Tiruchirapalli in Campion Anglo-Indian Higher Secondary School run by Jesuit brothers.” a bit like “home coming”. “It was not home to begin with, but it felt great to be back. That too while being attached with an educational institution,” he adds as an afterthought. When he was travelling to Coimbatore, Damodaran was also making a move to an English-medium high school. His fluency in the language was limited to his ability to remember the English alphabets and being able to say his name. The first two schools his mother took him to showed him the door fairly quickly. The third had a wise headmaster. He asked Damodaran’s mother, “I suppose he doesn’t know any English?” She admitted that he didn’t and insisted he would soon learn. “I am sure he will”. And he was in. That was an important life event; when someone gave him a chance on the basis of what he did not know. Later in Campion, Damodaran counts his Principal, Jesuit Priest Father Tamby—a “phenomenal person”— as one of the major influences in his life. “He had seen life from both sides as he was a former member of the Indian Navy before becoming a priest. I admired that.” Life’s adventures began in the pre-university period. “I did fairly well in Loyola College and went on to join IIT, Madras. It is one of the few minor achievements of mine that I am an IIT drop out,” he says with his characteristic booming laugh. He admits to have learnt a lot at IIT—except engineering! It was to be the start of a slew of projects which he would “drop” half-way, only to pick up again much later (much to the chagrin of his parents). After IIT, he returned to Loyola and completed his first degree in economics. He went on to join the Madras Law College and dropped out after eight months. “If I could rewrite my life—not that it is a regret—maybe I would not have dropped out. It was a two-year course. I was already into the eighth month. My professors though I was a good student. They were upset. But my father had retired. As the eldest child I took a step back and let my younger siblings have their chance. Not that education was expensive or that my father couldn’t afford it. I started to apply for jobs with no qualification apart from a BA Honours degree. Some companies were actually kind enough to offer me a job. After much mulling I became a probationary officer at the Indian Bank.” He was there for six months and then decades later he returned as its Officiating Chairman helping in the systemic re-structuring of the bank. After Indian Bank, it was time to move to State Bank of India. Again the magic of six happened—till he joined the Indian Administrative Services. Yes, quite the leap! “I got through on my first attempt simply because I did not have the luxury of a second chance. I was one of the oldest students applying having lost three years, thanks to the various stints. I am not too sure whether I wish to attribute this sudden move to parental influence. Of course I did have something to prove after I had dropped out of IIT and law college. I was a reasonably good student (read: he was a topper through school, college and university examinations), but there was always the feeling that this fellow was up to no good! I suspect that at some level my parents did get upset with that. I needed to prove to myself.” So, armed with an economics graduate degree (everyone else had at least a postgraduate degree), he started his battle—preparing for the tests. Imagine this: Damodaran was posted as a probationary officer at the Indian Bank, Vijaywada, when he was appearing for his IAS entrance tests. His examination centre was in Madras. He could not—as a probationary officer—request for leave. So he travelled overnight in the unreserved compartment from Vijaywada to Madras on examination days and came back on the same days. He had no benefit of coaching but months of law studies made him confident enough to choose mercantile and general law as his papers, apart from economics—again, just because he had ‘phenomenal’ teachers. Other subjects included jurisprudence, and political organisation and public administration; and he was a first timer to both. When he cleared his IAS test, He was posted to the Union Territory Cadre and packed off to Tripura (an union territory at that time) for training. Sometime Tripura proved to be a “cultural shock” for this citizen raised in the south of India, he says that the lack of courts was a bothersome and goes on to laugh. Interestingly that was the last time he “properly” played the sports. Now he takes pride in the fact that his son is better at it. Eight years in Tripura. “I was the Director of Tribal Welfare for close to two years. When I was transferred local tribal leaders protested. I suppose I found some measure of acceptance. I also drafted Tripura’s first Tribal Sub-plan (TSP) which made me unpopular among people who thought I was taking away their money for a ‘sub-plan’.” Damodaran was also the first non-political appointee to his district during President’s Rule. Former Home Secretary LP Singh, who later became the Governor, appointed him. After his Tripura days, Damodaran came to New Delhi in later, Tripura received statehood. Those in the know with the “right connections” and an understanding of the services, wrangled out. “I didn’t know enough and had no interest in Delhi. So off to Tripura I went.” When he landed at the Agartala Airport, he possessed a suitcase, a bed roll and a tennis racquet—he played the sports reasonably well. While waiting for his ride, a gentleman informed Damodaran that there were no tennis courts in the state. When quizzed whether the Ministry of Defence where he stayed for—hold your breath—eight months, followed by the Ministry of Textiles where the stint was longer at three years plus. It was at the Ministry of Defence—where he was “hopelessly underemployed”—that he registered for an evening course in law and finished his law degree. “I wasn’t the oldest student in class though. There were people who had retired from their professions. I was only in my thirties,” he laughs. He did well in law and received a high first-division. Today he still reads judgments. “You drop out because you think you need a job. Then you have the comfort of a job. I have enjoyed everything I have done, even if they were not conventionally the best. Along the way there is the family then you do not wish to take the risk and give up your pay cheque.” The Switch “in my life there have been far too many coincidences. I was the Chief Secretary of Tripura for three years. During that time, Dr Manmohan Singh paid us a visit. He was then the Member Secretary of the Planning Commission. The second time he visited, he was the Finance Minister. I closely interacted with him—as I had to explain the state’s workings through a number of interactions. Afterward he mentioned that when I was ‘done’ perhaps he would have a place for me.” A lot of people usually say so—but Damodaran believed Singh meant it. “When I finished my term with the state government as its Chief Secretary and returned to Delhi as the Principle Resident Commissioner—I wanted to spend some time with my family living in Delhi then—I happened to visit the North Block office of the Home Ministry. My driver dropped me off at Gate 2 while I was supposed to go to Gate number 4. And there was the Finance Minister coming out just while I was going in. He asked me what I was up to and I took a chance—I was slotted a time in the afternoon. He decided to take me into the banking division.” And thus the switch happened. Of course, the Finance Ministry was doing nothing out of charity. Damodaran had nursed a bankrupt state of Tripura back on its legs. “After I was done we (the state administrative machinery) still did not have enough money to pay salaries. But we were no longer an overdraft state,” he says. Five years in finance followed. When that term, too, was over it was time to return to square one—the state government. By then Damodaran’s juniors had moved along to higher posts, and he did not wish to rock any boats. Neither was he interested to work in the same capacity anymore. It was then when he was caught in the calling dilemma that RBI Governor Dr Bimal Jalan offered an opportunity—since Damodaran’s Midas touch had worked with state coffers, if he would be interested to use his skills in the banking sector and help restructure three Indian banks (Indian Bank, UCO Bank and United Bank of India). Damodaran was asked to move to Bombay—far from his family in Delhi. He put his foot down till he was allowed to work out of New Delhi and report to Dr Jalan—a fairly large concession. Strangely, Damodaran calls this part of his stint as one that involved little paperwork. “The number of hours I put in for this job were less than I was used to and the paper work was also light. I was by myself, interacting with three banks—helping them to find them new chairpersons. It must have been something that I said or did, people started to believe that I had it too easy. So when the UTI crisis happened I was asked to go to Mumbai and start to earn a living,” he adds laughing. This time a transfer to Mumbai was unavoidable—and he was literally catapulted to a new city over a weekend. Damodaran was celebrating 30 years of joining the civil service with his friends on a rainy Saturday night when he received a call stating that the Finance Minister wished to see him at 10.30pm at the latter’s residence. “I was forced to inform the Special Secretary that I didn’t see ministers at their homes during daytime. What made him think that I would do so at night? (In the 40 years of working for and with the government, Damodaran has visited ministers’ homes thrice.) I was told I had to go nonetheless, and I abandoned the 30-year celebration half-way.” There he was informed that he had been appointed as the Chairperson of the UTI. “I believed that people needed my permission to grant me a post. I was ordered not to make a fuss. The suggestion had been received by the Prime Minister as well.” It was a time when General Musharraf was on his famous Agra meet in India and Dr Singh finished an official dinner with the Pakistani Minister to come home and designate the new duties to Damodaran. “At seven o’ clock next morning I was woken up by the phone ringing. A telephonic voice asked me to proceed to Mumbai by 9am to take over in the morning. I said, I am sorry but I happen to be in my bed. The voice asked if I could go in the afternoon. I relented. My first board meeting was at 4pm on that Sunday. We took our first decision to open a partial repurchase window for Unit 64 that day itself.” Even before the rest of the organisation had seen Damodaran’s face, he had taken a decision that would change the course of the bank’s future. That was how Damodaran states he got into the ‘arena’ of finance though he was always in the area of finance. “Incidentally, I quit the arena on a Sunday as well, under completely different circumstances,” he says with a mischievous smile. Damodaran’s UTI stint lasted for three years. By then Jaswant Singh was the Finance Minister of India. Singh asked the finance guru to take over the IDBI concurrently with UTI—which Damodaran did. He turned IDBI into a bank, tided over a major merger and did the stressed asset stabilisation front of `9,000 crore. Normally, bail-out and restructuring operations do not lead to profit. However, the Indian Government has been making profit from the UTI even after paying off all dues. And as far as the IDBI is concerned—in a cash neutral manner—Damodaran and team took out `9,000 core worth of MPAs and lodged it in a fund. At last count some `5,800 crore were recovered from it. The best thing? The Indian Government still has 10 years in those interest free bonds. What three previous chairpersons of the IDBI could not manage in all the years, Damodaran managed in three years—though he became unpopular in the process (his effigies were routinely burnt by labour unions). In the UTI, Damodaran reduced the work force from 2,400 to 1,100, and enforced the Involuntary Retirement Scheme. Result; a few more burnt effigies. “That’s part of the process. If you wish to work in favour of public interest then you have to take protests in your stride.” Where We Go Wrong–Every time “The one advantage of studying law is that you tend to hear out all sides. Problems usually have more than two sides. When you hear them out, you tend to weigh all of them in. You don’t start out with one eternal truth. India’s problem is that we have a long-standing love affair with the process of taking decisions. That’s not the way to success. When there are enough alternatives on the table then one should look at them and take a decision—it may be the right one or the wrong one.” Ask the man who has taken some of the toughest decisions our behalf, he says he can live with a wrong decision as long as it was made after honest reconsideration. “We define accountability wrongly. It is not only about taking decisions bona fide. I want to make a distinction between taking a decision bona fide, and taking correct decisions. Ten out of 10 every day is god’s sports. But 10-out-of-10 you have to take decisions. You have to distinguish between taking decisions bona fide and taking decisions mala fide. Accountability must extend to those not taking a decision as well, especially those who have been placed in positions where they are expected to take some. In the General Clauses Act, it says that an act includes an omission to act. So if I am supposed to do something and I don’t do it, I am equally accountable. We never hold anyone accountable for errors of omission but for errors of commission.” For people singing paeans for passion—Damodaran believes that passion has no place in the decision-making process. “You have to decide objectively, keeping personal prejudices out, and then implement the plan passionately. If you remain true to the process, no one in the organisation has the business to keep on second guessing that decision. One may re-visit a decision during a mid-term review. But never take a decision on Monday morning, only to abandon it by the evening. At some stage, apply a closure to the consultative decision. Be a democrat this far—and not further.” With that we end our discussion.