Uday Kotak, chairman of Kotak Mahindra Bank Ltd. (Photographer: Udit Kulshrestha/Bloomberg)

Why Uday Kotak Wants Tech Giants To Stay Away From Banking

Banker Uday Kotak said technology companies like Google and Facebook should not be allowed to become banks as they don’t like to be regulated.

He said banking is a business with a high degree of leverage involving public trust and continues to be synonymous with safety. “If a Google or a Facebook ever decided to be a bank, we have a problem. They don’t want to be as regulated as we are,” Kotak, who heads Kotak Mahindra Bank Ltd., said while speaking at the annual Nasscom leadership summit in Mumbai on Wednesday.

The comments come amid an aggressive play and keen interest by the global tech giants like Google with its payment platform Google Pay in the domestic financial sector, especially through payment services offerings. Even Facebook has piloted a payments service through WhatsApp.

Kotak said banks work at a leverage of 10:1 wherein they lend out Rs 10 for every rupee of capital which they have. It is a high risk business, but perceived to be safe, Kotak said, stressing banks have “no choice” but to manage the risks well.

He also said that young people are a bit adventurous with their investments and often put money into risky bets. However, fortunately, Kotak said, a large pot of money is with the old people who allocate the resources very judiciously.

Kotak advised young fintech players and startups to enter the fray assuming that they will fail, as 99 percent of new entities fail.

Stating that banks and other entrenched financial services players should not be complacent in facing competition by young companies out to disrupt the game, he said within a week of demonetisation, a “relatively unknown” company Paytm became a common place across the masses.

“It shook us out of our slumber,” he said, adding this made his bank soon launch the 811 account opening drive which yielded good business as it helped address the opportunities in the mass segment from the earlier mass premium segment.

Kotak also sounded peeved at the high cost of accessing information technology services, exhorting software players to offer services at lower cost and said they need to offer services at 1-2 percent of the cost they are charging now.

He also rued that while the country has made a name for itself rendering software services to the world, there have not been enough product companies, resulting in multinationals to make a lot money.

Also read: Uday Kotak Says Regulators Still To Catch Up With A Changed Market