Govt must think of many AIFs, rather than one bad bank: Kotak

Our Bureau Mumbai | Updated on January 27, 2021

Uday Kotak, Managing Director and CEO, Kotak Mahindra Bank, and President, Confederation of Indian Industry.   -  BUSINESS LINE

Besides securities, these funds must be allowed to buy bank/NBFC loans, says top banker

Instead of setting up just a single bad bank, the Centre should consider floating multiple such outfits in the form of Alternate Infrastructure Funds, Uday Kotak, Managing Director and CEO, Kotak Mahindra Bank, and President, Confederation of Indian Industry, said. The veteran banker also suggested the setting up of a development financial institution for infrastructure, while speaking at BusinessLine’s Countdown to Budget 2021 event on Wednesday.

“One of the suggestions we have made from the CII is rather than thinking about just one single bad bank, where you have a big challenge of clearing price, allow floatation of multiple bad banks in the form of Alternate Infrastructure Funds registered under SEBI. They should also be allowed to buy, in addition to securities, loans from banks and NBFCs balance-sheets and to be considered as part of the permitted activity for AIFs,” Kotak said while delivering the keynote address at the HDFC Bank powered conference themed ‘Unleashing the animal spirit in a pandemic hit economy’ .

‘Needed, a DFI’

He also suggested setting up of a development financial institutions.“The reason is if you look at NABARD, which has been a success in rural and agriculture, or SIDBI in the area of MSMEs, the time has come for a massive infra push for India’s growth transformation and through that creating a reverse demand for various other products and services. A DFI, with a creative way of funding that institution with long-term money, is something that may be appropriate,” he said.

Budget 2021-22, which is being presented amidst the Covid-19 pandemic, is not just about arithmetic but also about being a policy document that spells out a new future for the country, Kotak said.

“We are in the best of times, the worst of times...the pandemic is a once-in-a-hundred year event. For all the challenges it has created to lives and livelihood, it is also the best time for us to grasp the opportunity of a transforming world economy, Indian economy, and society,” Kotak said.

Five focus areas

He underlined five key focus areas that the Budget should focus on. These include infrastructure, healthcare, education, sustainability, and defence. Additionally, there is a need for a continued push in three areas of private investments, jobs and digitisation.

Finance Minister Nirmala Sitharaman, who will present the Budget on February 1, has promised a “never before” like Union Budget as the government looks to boost growth amidst the pandemic.

“I genuinely hope this Budget will live up to the expectation that it is a Budget like never before,” Kotak said.

He also called for a gradual normalisation of the fiscal deficit over a three-year period and recommended a stable tax and interest rate regime.


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Published on January 27, 2021
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