Business tycoon and Kotak Mahindra Bank chief executive officer Uday Kotak has clarified his remarks made at a corporate event, in which he called the U.S. dollar the "biggest financial terrorist in the world".
Kotak said he would like to "correct" the remarks that he made with regard to the U.S. dollar, saying he meant a reserve currency has "disproportionate power".
"In a recent discussion on U.S. Dollar I inadvertently used words “financial terrorist” which I would like to correct. What I meant was that a reserve currency has disproportionate power, whether it is nostro account, 500 bps rate increase, or emerging countries holding $ for liquidity," Kotak tweeted.
Kotak's statements regarding the hegemony of the U.S. dollar went viral on social media, in which he can be heard saying he "genuinely feels the biggest financial terrorist in the world is the U.S. dollar". "All are monies are in Nostro accounts and somebody in the U.S. can say you can't withdraw it from tomorrow morning, and you are stuck," says the billionaire businessman. In a Nostro account, a bank holds a foreign currency in another bank in the domestic currency of the country where funds are held.
He added that it is the power of a reserve currency. "We are at a very crucial time in world history where the world is desperately looking for an alternative reserve currency. These changes happen once in hundreds of years."
The last time it happened, said Kotak, was when the world moved from the British Pound -- "at the time when people used to say the sun never sets on the British Empire" -- to the U.S. dollar.
The businessman asked the question which country in the world can take that position? "I don't think Europe can because it is "disunited states of Europe". I don't think the EU or Japan have the heft to be taken those positions though both the currencies are free currencies."
China, he said, has a major issue of trust with many countries around the world. Can India do it, he asked, adding that building itself into a reserve currency is a long sustained walk and run India has to do.
"It has to build strong institutions, it has to build a framework, which is not dependent on the whims and fancies of A or B or C. The mechanisms have to be strong."
The Kotak Mahindra CEO said India has to be trusted. "The U.S. dollar, on every dollar bill has a line, 'In God We Trust'. We have to get the line to say 'In India, We Trust', for the rest of the world to put their money into an alternative currency."
It is India's time for making a shot at it, he said, adding that it could probably take 10 years to achieve that dream. "But I don't think China or Europe can make it. Otherwise, the U.S. has an unbelievable comparable privilege of being able to print money and get away with it as it has for the last 100 years."
Notably, the U.S. dollar has been used by several countries as a primary reserve currency since 1944, which is the reason any policy decisions made by its central bank, the Federal Reserve, have a huge impact on the financial reserves of the nations linked to it.