Kotak Mahindra Bank’s MD and CEO Uday Kotak said good governance will change the future of the corporate India and the government and India Inc should feed on each other for good practices. Kotak was speaking at the recently held ‘A Speaker Series’ organised by Rotary Club of Bombay.
The billionaire banker, who was conferred with the Ramkrishna Bajaj Award, said privatisation of state banks is not the only option but one of the options to help lenders recover from the bad loan mess. Kotak, who was delivering his speech after receiving the award, admitted that some private banks are not doing everything right either. He also said that India did not need 25 PSBs, but these banks should be merged into 5-6 state banks.
Recalling his journey as an ‘accidental banker’, Kotak thanked his father Suresh Kotak, who was also present at the function. “My family send me to a place called Kadi in Gujarat to look at ginning and storing of cotton in warehouses,” he said, adding it was part of his learning process. “There was a warehouse keeper who was taking care of the warehouse (this was in 80s before he became a banker). He had four name plates with names of four banks—Central Bank, Union Bank, Bank of India and Dena Bank.” On witnessing this, young Uday questioned the keeper and he said that different banks come to see the same cotton. He answered, “I change the plate based on the bank that comes for inspection. That they had borrowed four times over. That was my first learning on how to do banking. This came as a learning for me in the earlier days in commodity business.”
Talking about the present status of banks, Kotak said, “Being a banker, I have seen the challenges in governance, especially the level of stress we have been facing in banking.” He added that is the main the reason for such high levels of NPAs in the banking sector.
Going back to the time of nationalisation, he said that the whole purpose of nationalisation has been lost if you look at today’s context. “The main reason for bank nationalisation was that the private banks were giving money to big businesses; and there was a network between private banks and business. The purpose of nationalisation was to broaden the base of banking and its services to the broader society. But nearly 50 years later, the most disappointing factor is that the bulk of the losses of the public sector banks are due to lending to the big business.”
Kotak, who had led committee on corporate governance, expressed the need to ask tough questions like what has public sector banks (PSB) achieved over years. He added, “Most governments have used banks for state policies…”
There are times when government policies have been difficult for companies to adapt to changes in regulations, he added. But he claimed that is not an explanation for the large amount of money that is siphoned out off from Indian Banks.
He said changing government policy over years was the major dampener of business, but he feels the next disruptor for business would be technology. With a tone of caution, he said be aware of the disruption which technology will bring in each and every business.
