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HDFC chairman Deepak Parekh on Saturday said family businesses must desist from getting into legal battles and rather appoint an internal arbitrator to resolve disputes.
“…permit me to offer an old man’s advice on family businesses. While one hopes families stay amicable, the one thing one must desist is families going to court and suing and counter-suing each other.
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“Court cases take years, wealth gets depleted and the same problems get passed down generations. Always opt for an arbitrator — a person mutually trusted — and both parties should sign an affidavit that they will abide by the decision of the arbitrator. This, I promise, will help all sleep well at night,” Parekh said while speaking at the SPJIMR: Centre for Family Business & Entrepreneurship’s ‘Viraasat’ event.
In a candid speech, Parekh said over his 55-odd years of work life, he has had the opportunity to interact and observe at close quarters several family businesses, both large and small ones, and “the winners that evolved, the losers that dissolved”. In India, some of the prominent disputes between family run businesses include the conflict between Hinduja Brothers, which is now resolved, and the fight over Reliance Group’s assets between the Ambani brothers, among others.
“I have known business families that have managed to stay extremely close knit for generations, though these are now very few and far between. I have on a few occasions played the role of a boxing referee, physically unscrambling warring business families. In hindsight, I was fortunate not to have got some blows myself. Playing the peace maker as an outsider in a conflicted family business can sometimes win you accolades, but can also earn you a tonne of brickbats,” Parekh said.
Interest rates
Further, speaking about global macroeconomic scenario, Parekh said sudden changes from years of quantitative easing and negative interest rates to a sharp rise in interest rates have led to a cost-of-living crisis across many advanced economies. “In India… we are lucky to have finally got a pause in the rising interest rate cycle,” Parekh said. The Reserve Bank of India (RBI) on Thursday left its benchmark repo rate unchanged at 6.50%, after cumulatively hiking repo by 250 basis points since May 2022 till February 2023.
Parekh said in the recent period, geopolitics has dominated over geoeconomics, with spillover impacts on trade, services, technology, capital flows and even in the mobility of the labour force.
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“There is immense distrust amongst countries” at a time when everyone needs global cooperation to solve issues such as global supply chains, global warming, cyber threats, money-laundering, data privacy, responsible use of artificial intelligence, among several others, Parekh said.
India is not immune to these global shocks but has proved to be more resilient than many large economies, he said. Though India’s GDP growth will slow down because of global headwinds, it has enough tailwinds with political stability, vaccine security, food security, a robust domestic consumption-based economy, digitalisation and robust regulatory system for the financial sector, he added.
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