Finance Must Return to First Principles

Your journey spans India’s largest public-sector bank and some of the country’s most competitive academic institutions. How has this combination of public-sector pragmatism and academic rigour shaped your approach to decision-making, risk, and institutional design?

My time at SBI taught me a lot — how to work with limited resources, how to engage with a broad public, and how to address the unique challenges faced by people in semi-urban areas in India. While public-sector banks are often the subject of jokes and memes online, once you work within the system, you begin to appreciate how integral they are to national development. The ratio of people served to the resources available in public-sector banks is truly staggering. My academic training, on the other hand, honed my critical thinking and taught me to question everything. Taken together, these experiences have helped me develop a deep empathy for the underprivileged and recognise how privileged my own life has been — and continues to be.

The intersection of finance and technology is generating new paradigms, from decentralised finance to AI-powered trading. How can firms balance innovation with resilience amid rising systemic risks? And what core principles must we revive to rebuild credibility and long-term value in finance education and practice?

Technology has transformed the financial sector. The sheer volume of transactions our payments system now handles is largely due to technological innovation. But with increasing sophistication comes greater responsibility. The rise in financial scams is one side effect of this digital surge. Beyond outright fraud, mis-selling has long plagued India’s financial services, and it’s worsened with the advent of quick-loan apps and similar tech-enabled platforms.

At the heart of your question is a call to return to fundamentals. The first principle of Finance 101 has always been the maximisation of long-term shareholder wealth. Yet today, terms like blockchain and AI are thrown around with such abandon that they risk becoming the modern-day equivalent of snake oil. We must revive principles like long-term thinking, ethical behaviour, and value creation rather than chasing trends or short-term gains. Finance, at its core, is about building value and stability. Credibility stems from a responsible, grounded approach — and that’s what ultimately leads to long-term success.

Your paper on quality investing in the Indian context points to the growing maturity of Indian equity markets. But many institutional investors still hesitate to treat India as efficient or factor-driven. What myths or outdated assumptions do global investors often bring to emerging markets, and how should they be challenged?

To clarify, my paper doesn’t argue that Indian markets are mature. It suggests that factor-investing strategies are likely to work here, in contrast to markets like the US, where their effectiveness has waned over the past two decades. In fact, the past three to four years reveal how far Indian markets still have to go. The inflow of funds into mid-cap, small-cap, and SME stocks has led to excessive valuations. The sensitivity of these assets to fund flows is troubling — it indicates that prices can easily deviate from fundamentals. Social media influencers have only amplified the volatility, although that’s likely a global trend.

That said, the rise of factor investing, index funds, and ETFs (Exchange-Traded Funds) does reflect a growing awareness that consistently beating the market is difficult, and a disciplined long-term approach may be more rewarding. But excessive passive investing can also create distortions. In fact, the very act of treating a market as efficient can, paradoxically, make it inefficient.

India’s financial services sector remains heavily sales-driven. This was evident in the mis-selling of ULIPs and insurance products and now continues with investment offerings. Active investment products are pushed more aggressively than passive ones due to higher distributor commissions and expense ratios.

As for myths, global investors often underestimate the Indian regulator. The recent Jane Street saga underscores that India should not be treated lightly. Despite mixed anecdotes, Indian regulators have generally maintained a strong track record in protecting minority investor rights — a crucial distinction from other emerging markets.

With growing attention on ESG (environmental, social and governance), sustainable finance, and stakeholder capitalism, how should we rethink the role of financial decision-making in shaping long-term business purpose? Can finance be both a control mechanism and a lever for ethical growth?

Whether we like it or not, large asset managers and activist groups now wield enough influence to compel companies to change their behaviour. India may lag behind, but this is already the norm in many developed markets.

I do believe finance can shape long-term purpose by holding companies accountable and by embedding the right incentives for ethical growth. But the key is genuine integration. Sustainability must be part of core financial strategy, not a buzzword tacked on for appearances. Much of the current hype around ESG attracts opportunists and contributes more to confusion than to impact. With populism rising globally, it’s critical to return to first principles rather than inventing new jargon. Only then can sustainability become actionable, rather than aspirational.

Having worked at the intersection of education and practice, what gaps do you see in the way Indian business schools currently approach finance, and how can we better equip graduates to tackle the “unknown unknowns” of tomorrow’s financial landscape?

The usual complaint is that we’re too book-oriented, but I think that’s only partly true. From what I’ve seen across multiple top business schools, there is a strong practice orientation in our teaching. That said, there’s always room for improvement, especially as AI becomes more relevant.

What we really need is deeper critical thinking around financial theories. Take CAPM, for example. It’s widely criticised in academic circles for its empirical failures, yet I doubt many Indian B-school students are aware of these critiques or the evidence behind them.

In fact, finance education was more intellectually rigorous a decade ago. Today, we’re seeing declining interest in technical electives, even in top schools. This shift, driven in part by student preferences, is leading educators to lower the intensity of their material. If this continues, how can we expect students to handle the “unknown unknowns”? Understanding the nuances of financial complexity takes time and commitment. There are no shortcuts to developing that kind of depth.

Platforms like Xplore aim to create interdisciplinary conversations around leadership, business, and societal outcomes. How do you envision such forums reshaping the future of finance, especially in fostering dialogue between quants, policymakers, and real-economy actors?

Absolutely. Quant investing is growing rapidly on Indian social media, but we lack integrated spaces that connect practitioners across domains. Xplore can help fill that gap by adopting a thematic lens to explore the future of finance. By creating interdisciplinary dialogue, such platforms can bridge the divide between technical expertise and real-world policy and business considerations.

In your own professional journey, what has been the most important non-finance insight — drawn from a leader, institution, or life experience — that continues to shape how you teach, think, and lead today?

I’m not drawn to personalities with cult followings, especially the kind that dominate social media. The most enduring insight I’ve gained from my life and work is the value of old-school virtues: hard work, conscientiousness, and mental clarity. These qualities matter more than ever in our chaotic digital world.

Social media consumption is directly linked to insecurity and FOMO. That’s why it’s vital to keep both your mind and body in shape —especially when so many distractions are just a click away. Patience and a conservative approach might not make you rich overnight, but they often lead to a more fulfilling, stable life.

I’ve also observed a troubling rise in polarised thinking, where the strength of people’s opinions seems inversely proportional to the time they’ve spent understanding the issue. In my teaching, I try to remain open to student counterpoints while pushing them to question their own beliefs more rigorously.