‘Nation of savers to…': Uday Kotak on India's ‘phenomenal' transformation

‘Nation of savers to…’: Uday Kotak on India’s ‘phenomenal’ transformation

Kotak Mahindra Bank founder Uday Kotak, said that the nation has undergone a phenomenal transformation and the tendency to save money has been replaced by the mindset to invest money.Â

In an interview with Business Today, Kotak shared insights into the evolving landscape of financial services in India. He also talked about the shifts in consumer behaviour, the transformation of Indian capital markets, and challenges faced by banking institutions.

Kotak talked about the dual models that build the financial sector; the saver-borrower model represented by banks and NBFCs, and the investor-issuer model comprising markets, asset management, investments, and treasury.

He underscored the fluidity of customers transitioning between these models based on their financial decisions. Despite the sector’s separation, Kotak stressed the importance of aligning services with customer needs.

“You have to keep in mind what is your customer’s need. I am happy to say that from a situation where we were all concerned that the Indian capital markets were getting exported, we are now seeing a very robust market where the nation of savers has become more and more a nation of investors,” said Kotak.Â

Reflecting on the transformation of Indian capital markets, Kotak reminisced about past scepticism towards share investments in the late ’80s. He recalled a time when Indian companies had to seek capital overseas due to limitations in domestic markets. However, continuous efforts led to the development of the Qualified Institutional Placement (QIP) market, facilitating robust domestic capital mobilisation.

Talking about corporate governance, Kotak underscored the importance of substance over form. He talked about his experience chairing the Sebi committee on corporate governance.

“I had the privilege of chairing the Sebi committee on corporate governance in 2017, and we put a lot of things in place. Regarding governance, my view is that substance holds more significance than form,” said Kotak.Â

He outlined the need to prioritise the interests of all stakeholders, cautioning against excessive focus on procedural compliance at the expense of genuine governance.

“The principle of governance is very simple. You are running the firm for the interest of all stakeholders … and it is your duty to take care of the interests of all the stakeholders. And this is at the core [of our] governance principles. And what we have to be careful [of] is that we don’t start believing that operational detail overrides the substance of governance,” said Kotak.

He also shared his thoughts on the challenges that banking institutions may face going forward. Kotak complimented regulators and policymakers for managing the financial landscape well post-covid.

“I would like to compliment the RBI, Sebi, Irdai (Insurance Regulatory and Development Authority of India), MCA (Ministry of Corporate Affairs) and all the regulators, as well as the government in general, for navigating the Indian financial sector’s ship so beautifully, particularly in the post-Covid period,” aid Kotak.Â

However, he underscored the inherent risks in the high-leverage financial sector and stressed the imperative for a delicate balance between regulation, risk management, and growth aspirations to propel India towards its $30-trillion economy target by 2047.

Regarding the outlook for interest rates, Kotak suggested that if inflation comes to around 4.5%, a moderation in interest rates could be anticipated, possibly in the latter half of 2024-25.Â

“If the inflation is at 4.5%, we could see some moderation in interest rates. My expectation is that it will happen closer towards the second half of 2024-25, and we could see some moderation from the current repo rate of 6.5%. However, we should not count on this happening soon because we are also watching what’s happening globally,” said Kotak.Â

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