Noting that the financial sector will require recapitalisation in the current situation, Uday Kotak, veteran banker and Managing Director of Kotak Mahindra Bank, said the capital raised by the private sector lender will help it meet with any contingencies or financing business opportunities.

“The banking sector’s loan book is about ₹100-lakh crore, and the total capital of all banks in India is about ₹11-lakh crore to ₹12-lakh crore. So, if four per cent to five per cent of loans turn bad due to Covid, the capital position of the banking sector will get impacted by about 40 per cent,” said Kotak in the company’s latest Annual Report, adding that while there will be some mark-to-market gains as bond yields have dropped, the financial sector will need to be recapitalised.

The bank raised ₹7,400 crore through Qualified Institutional Placement (QIP) in May.

“This additional capital will support the bank in dealing with contingencies or financing business opportunities (organic and or inorganic),” he said.

Next annual general meeting

Kotak Mahindra Bank is scheduled to hold its annual general meeting on August 18, where shareholders will approve the annual report.

The agenda for the meeting also includes the re-appointment of Kotak as MD and CEO for the period between January 1, 2021, and December 31, 2023, subject to approvals, as well as the appointment of a Director in place of Dipak Gupta who retires by rotation and, being eligible, offers himself for re-appointment, subject to approval of the Reserve Bank of India. The AGM will also confirm payment of interim dividend on preference shares.

In the post-Covid scenario, Kotak said the private sector lender will focus on the safety of employees, costs and productivity; on the lending side, it will divide the world into ‘Before Covid’ (BC) and ‘After Covid’ (AC).

“In the AC world, we are looking at our lending business differently through three filters. First, we develop a view on the sectors we are comfortable with. Second, we look at levels of fixed operating costs of individual companies (the higher the level, the more cautious we are). And third, we are mindful about how we deal with businesses or companies with high leverage,” he said.

However, with the government stepping in as a guarantor for MSMEs, the bank will also look at the lending opportunities in the sector that will also help kick start the economy.

Kotak said the bank also sees an opportunity to grow its customer franchise in non-credit risk areas of business – advisory, insurance, securities, wealth management and asset management. “We also continue to see robust growth in the brand, the franchise and the positioning of our firm as a consolidated entity,” he said.

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