Only five large banks can survive in the long-term, says Uday Kotak
Uday Kotak declined to specify the names of five banks but said State Bank of India will be one among them
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Mumbai: Banker Uday Kotak feels there will be strong consolidation in the financial services sector and eventually only five players will dominate the space just like in the global space.
“Globally, in most countries, there are only three to five large banks which dominate. This is how the future will be in our country as well,” Kotak, vice-chairman of Kotak Mahindra Bank, told PTI in an interview over the weekend in Mumbai.
India will be no exception to this global trend of having a few dominating players, he added. When asked about the names of banks which will dominate the domestic banking space, Kotak declined to specify the names but said State Bank of India will be one among them.
“The rest who knows? Can’t say anything about ourselves but each of us will have to do our bit to get ourselves onto the high table. You just can’t take it for granted,” he said.
Kotak, whose bank is widely speculated to be interested in buyouts, acknowledged that consolidation is something his bank is interested in. “We are open to change that is bold and that can be game-changing in the financial services industry,” he said, but quickly added that there is nothing to announce now.
The board of the bank last week decided to raise over Rs5,300 crore by diluting 3.3% of the promoters holding, for pursuing a host of opportunities, including consolidation. When asked if his bank which completed an integration with ING Vysya Bank, is ready for another such exercise, Kotak replied in the positive.
“Do you think we are fatigued? We are alive and kicking, and have learnt a lot from the merger. That does not mean we are rushing into a merger but we are always open and keep our eyes and ears open for consolidation,” he said. He said the share of private sector lenders should eventually grow beyond the present 25% or thereabout.
“Competition may be from government banks, new players. You have to be alert, agile and paranoid,” he said. Kotak also made a strong pitch for having norms on “bank mortality”, underlining that not all the players who enter due to liberal rules can’t make it commercially, and should thus be given exit options.
“That is a big issue. Who is thinking about mortality in banking? We have to see in the long-term how it happens. As you make entry easier, mortality always have to be thought about,” Kotak said. When asked about if e-wallets will succeed, Kotak said, “to some of those models, you need to ask the question- how will you get stickiness and ultimately monetise?”
Advocating a faster push on growth, Kotak said he is getting the vibes of an uptick in growth. “Macroeconomic stability, now combined with political stability, is a very big plus for the country to embark faster on the growth side. This is our opportunity,” he said.
When pointed to the continuing reluctance of private sector to invest since the past three years now, Kotak said, “we need to be bold and get the animal spirits back. We will get it back, people should feel excited to invest.” He said a newer breed of entrepreneurs will emerge and the “historical Lalas” will change.
On whether government can meet divestment targets and if the markets will continue to rally, he said the present bullishness in the capital markets will help government achieve the aggressive divestment plans in fiscal 2018. On his expectations from the forthcoming monetary policy review, Kotak said he expects the apex bank to go in for a status quo at the next week’s review.