Money & Banking

Turbulence in financial sector may eventually impact the real economy: Uday Kotak

Our Bureau Mumbai | Updated on May 01, 2019 Published on April 30, 2019

Uday Kotak, MD & CEO, Kotak Mahindra Bank announcing banks Q4 & FY 2018-19 results in Mumbai on Tuesday   -  BUSINESS LINE

High concentration of NBFC players poses a challenge, says Uday Kotak

Veteran banker Uday Kotak, on Tuesday, said the turbulence in the financial sector could eventually impact the real economy as well.

“We are in the midst of one of the very significant financial challenges. The next six months are crucial on how India handles the financial sector to take it to safe waters from turbulent waters,” said Kotak, Managing Director (MD) and CEO, Kotak Mahindra Bank.

While the banking sector had benefited from a flush of liquidity after demonetisation, Kotak said this is now moving back to illiquid assets such as land and real estate, leading to tighter liquidity conditions. Cash in circulation is now at a high, he pointed out. Coupled with the long non-performing assets (NPA) cycle after 2011, Kotak said this has become a significant challenge for the whole financial sector. “What happened at IL&FS could be the first signal of the challenge of the financial sector,” he said.

Meanwhile, when asked about the challenges in the non-banking financial companies (NBFC) sector, he noted that there are a lot of players in the market.

While some are doing very well, others are not doing so well, with problems in underwriting and various other issues.

“Solutions in the sector include new equity, combinations and mortality, of which I would like to see more of the first two,” he said. Kotak also said he is watching the auto sector very closely. Passenger car sales have seen a slowdown and though the apparent reason seems to be availability of finance, he questioned if there is also a fundamental structural change in consumer behaviour.

This could possibly be due to ride-hailing apps, he added, while stressing that it is too early to have a definite answer as there are also pockets of unmet demand.

Published on April 30, 2019

A letter from the Editor

Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Support Quality Journalism
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.