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A Rupee for Citigroup’s Thoughts

— Andrew Leonard

As the brand new CEO of Citigroup, Vikram Pandit is merely the most high-ranking of an impressive cohort of Indians manning the battle stations at one of the world’s largest financial institutions. According to India’s Economic Times, 13 Indians serve on the bank’s management committee. Among the other stars, Ajay Banga, chairman and CEO of Global Consumer Group International, Deepak Sharma, CEO, Citi Global Wealth Management International, Vikram A. Atal, Chairman & CEO, Citi Cards, Global Consumer Group and Suneel Bakskhi, head of Citi Markets and Banking.

And to think, scarcely a few decades ago, India was dismissed by the world’s gung ho capitalists as just another socialist backwater. But if the symbolism of the middle-class boy from Nagpur turned “self-effacing derivatives wizard” taking the throne of Citigroup isn’t enough there are also reports that the World Bank is considering, (or has already agreed to) make its first-ever rupee-denominated loan to the Indian state of Maharashtra (from whence, incidentally, Vikram Pandit hails.)

Traditionally, the $3.5 billion loan would have been made in dollars, but the Maharashtra state government is reportedly worried about the downward fluctuation of the greenback. The rupee, however, has been appreciating steadily, and India’s double-digit GDP growth suggests that there is more room to grow. (Thanks to The Indian Economy Blog for the link.)

The decline in the dollar, of course, is connected to the subprime mortgage collapse and consequent market turmoil that pounded Citigroup hard enough to force out its previous CEO, Charles Prince. So in comes Vikram Pandit, and up goes the rupee.

UPDATE: Readers, both in comments and in e-mail, are suggesting that I have may have misunderstood what’s going on with respect to the Maharashtra loan. Felix Salmon notes that “Surely Maharashtra would be ecstatic if it borrowed in dollars and then the dollar fell against the rupee?”

The original BBC story notes that Maharashtra is worred about “fluctuations” but doesn’t specify whether it fears that the dollar might continue going down or is about to go back up. So perhaps the World Bank is the prime motivator in wanting the loan denominated in rupees, because it would be the party that would stand to benefit from increased appreciation of the rupee.

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