Singapore: The real estate and financial services sectors in India are set to witness a significant consolidation in the next two years, said Uday Kotak, CEO and MD of Kotak Mahindra Bank.

Speaking at the HT-MintAsia Leadership Summit in Singapore on Friday, Kotak said banks need to be very alert because no one knows “who’s going to eat your lunch the next day".

“One of the things we’ve got to consider ourselves lucky is that, globally, Google and Amazon have decided not to go into banking," he said.

Drawing an analogy between the banking sector and Bollywood films, Kotak said private banking in India is currently “seeing a love story developing, but there’s a villain in the middle". “I think the villain is slowing growth and Indians are scared to invest (in the economy) because they are worried that things might not get better. It’s a classic thing I’ve seen so many times over—and we go through it every few years. Look at the 1998 Asian financial crisis, then 2008 and now 2018," he said.

And, what have these cycles taught him? “My view is it’s never as good as it looks and it is never ever as bad as it looks." Kotak said interest rates should be cut further and the rupee allowed to depreciate a little more. There is also work to be done on the governance front, he said.

“I think on the governance framework side, there is an issue with six layers of checks and balances that are not working —the management, board of directors, institutional investors, auditors, regulators and rating agencies. Quality of governance is also an extremely important part."

He said the financial sector is going through an “evolution", citing IBC as an example. “When it was ushered in, we believed we were going to have a fantastic cleaning up of the system quickly. But it has taken longer...Once you’re doing a clean-up, a speedy clean-up is as important. Second, I don’t think India is fully ready for challenges in financial sector resolution. An example is DHFL. So, how do we resolve the financial sector when the insolvency and bankruptcy court don’t apply to the sector? We need a fourth financial sector resolution mechanism," he said.

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