Uday Kotak said private lenders will have half of the market share in all bank loans in five years in India as their state-owned peers struggle with non-performing assets.
Most of the incremental lending over the last year has come from private banks, said Kotak, executive vice chairman and managing director at Kotak Mahindra Bank. As of now, public sector banks account for 70 percent of the outstanding loans.
Indian banks’ bad loans have more than doubled since the central bank started its asset quality review in 2015. Public sector banks contribute about 90 percent of total non-performing assets worth more than Rs 8 lakh crore. With large bad loans under insolvency resolution, demand for credit from corporates is yet to pick up.
Yet, Kotak said, it wouldn’t be fair to claim that lending has come to a standstill. The banking system will see credit growth from the small and medium enterprises even as corporate borrowing remains challenging for all lenders.
Banks, however, may face some stress from small businesses, he said. “Earlier some SMEs were playing on the tax arbitrage, which has now gone away due to GST (goods and services tax). This will lead some stress in the short term.”
He was speaking at an event discussing the digital banking landscape and the future for Kotak Mahindra Bank. His bank has introduced four new features to ensure that technology leads the next leg of growth, Kotak said. The lender will work with mobile applications enriched with artificial intelligence, branches enhanced with biometrics, context enhanced customer experience and data empowered design to make banking more convenient, he said.
With better technology and more data analytics, the banking system can improve on underwriting standards and avoid large non-performing assets, Kotak said. That’s where Aadhaar, he said, had proven to be very powerful in improving the business prospects for the banking industry.
The world’s biggest biometric identification programme has triggered privacy concerns amid reports of unauthorised people gaining access to the database. The Supreme Court is hearing a batch of petitions that argue that Aadhar is intrusive and against the right to privacy.
Nandan Nilekani, the architect of Aadhaar and chairman of Infosys Ltd, who was also speaking at the event, defended the programme as the most safe and secure electronic know your customer (e-KYC) tool which can be used by a large number of customers.
Nilekani, however, said while Aadhaar could not be used as an exclusionary tool where government services are denied to people without the 12-digit ID.