It’s Time For Indian Entrepreneurship To Get Back Some Of Its Animal Spirits, Uday Kotak Says

Billionaire banker Uday Kotak believes that while there are challenges such as slowing GDP growth and limited fiscal space, softer commodity prices and lower global interest rates can work in India’s favour.

“The time has come for Indian entrepreneurship to get back some of its animal spirits,” Kotak, managing director and chief executive of Kotak Mahindra Bank Ltd., said in a message to shareholders in the bank’s annual report. “We need to take bold steps to reform the financial sector, the real and social infrastructure, remove bottlenecks in different segments and unleash the economy for significant growth in the years to come.”

The veteran banker had in May highlighted the stress in the financial sector that’s hurting the real economy. Earlier, the challenges of the real economy impacted the financial sector. But now, the reverse is also true, he had said. The next six months, according to Kotak, would be crucial in terms of how India handles its financial sector.

“The year 2018 witnessed tremors in the Indian financial sector. I see 2019 and 2020 as years to cleanse, repair and nurture Indian financial institutions. We have work cut out for both practitioners and policymakers,” he said in the annual report.

“The major issue talked about is liquidity. I, however, see it as the price of liquidity. Concerns on solvency in some cases are also weighing on the markets. At this stage, I don’t see this as a systemic risk and am confident that the policymakers and regulators will take steps to manage the situation.”

Though Kotak said high rates on government savings schemes and distortion in yields due to differential tax treatment on debt instruments are challenges in the reduction of deposit rates, he expressed confidence in the new government.

“India has once again reposed faith in Prime Minister Narendra Modi’s vision for a new India. As we undergo a significant political transformation of India, it is now time for us to focus on the economic transformation,” Kotak said. “This is a new India where governance and transparency will be the pillars of progress.”

Here’s how Kotak Mahindra Bank performed over last fiscal and how it sees the way ahead:

• The current account-savings account ratio stood at 52.5 percent as of March 2019 against 50.8 percent a year ago.
• Focus on retail deposits, particularly deposits below Rs 1 crore, continues. Such deposits grew 30 percent year-on-year.
• Witnesses an opportunity to gain market share.
• Committed to the broader financial services business, including life insurance and asset management.
• Growth in embedded value of life insurance business stood at Rs 7,300 crore against Rs 5,800 crore.
• Lower cost and stable liabilities.
• Lower financial risk but high franchise value businesses.
• Growing the risk book without diluting risk adjusted returns.
• Embracing the new world of digital, analytics, artificial intelligence and technology.
• Constantly exploring new opportunities.