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  1. As banks tackle large corporate NPAs, are SME bad loans next war frontier? Uday Kotak warns

As banks tackle large corporate NPAs, are SME bad loans next war frontier? Uday Kotak warns

The concerns around small and medium enterprises (SMEs) are ‘probably understated,’ and the worries will aggravate further after RBI’s recent circular on non-performing assets, said Uday Kotak.

By: | Published: March 21, 2018 11:57 AM
Uday Kotak Up from 30 percent now, private sector banks will cover half of the credit market in the next four years, Uday Kotak said.

The concerns around small and medium enterprises (SMEs) are ‘probably understated’ and the worries will aggravate further after RBI’s recent circular on non-performing assets, Kotak Mahindra group chief Uday Kotak on Tuesday said at an event. While there is more focus on the large businesses, the pain lurking from SMEs has not been fully revealed yet, the veteran banker told reporters at an event. Following Rs 13,000-scam at Punjab National Bank (PNB), almost all the loan growth is accounted by the private sector banks, he said. Up from 30 percent now, private sector banks will cover half of the credit market in the next four years, he added.

The executive vice chairman and MD of the Kotak Mahindra Bank (KMB) also said that over the coming five years, the market-share ratio of public sector banks to that of private sector banks will plunge to 50:50 from 70:30 currently. When compared with private banks (excluding foreign banks), the share of public sector unit banks has declined under 70 percent, he said. Down from a 73 percent share in credit and deposit categories, the PSB share has fallen down to 62 percent and 65 percent, respectively, at the end of March 2012, he informed. Kotak Mahindra Bank will have a higher share of the market five years from now, he said.

Meanwhile, Morgan Stanley’s Ruchir Sharma had said that India’s banking sector is very unbalanced last Saturday at an event. He had said that a regulatory overkill exists in the country’s banking space since private banks will keep lending and central banks keep holding to their assets. The head of emerging markets and the chief global strategist at Morgan Stanley Investment Management, said that every country needs a public sector but there is no other country like India that is such unbalanced. Majority of the financial assets in the India’s banking sector are owned by the public sector banks and hence, make it a skewed in nature, Ruchir Sharma said. The economic prospects of India attaining a growth rate of 8 percent to 10 percent is difficult to imagine especially in the current global climate, he added.

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