NPAs in banking sector likely to be lower than RBI forecast: Uday Kotak

The RBI has forecast gross NPAs to be in the range of 13.5-14.8 percent by September 2021, the lower end and upper end being the baseline case and severe stress case scenarios respectively.

Kotak said that the COVID-19 pandemic caused disproportionate pain to the lower end of borrowers as well as consumers.

He expected the unsecured (credit cards, personal loans) and consumer loan segments, especially in the urban centres, to continue to show pain.

Kotak further said the Emergency Credit Line Guarantee Scheme announced by the government in the aftermath of the pandemic has helped many micro, small and midcap companies get back on their feet.

He was optimistic on the tractor, passenger car and construction segments, but said the commercial vehicles segment was still seeing challenges.

Sharing his views on growth he said that on a nominal basis, the economy should grow in double digits on a sustainable basis. He said Kotak Bank aspired to grow at twice the rate of nominal GDP, adding that the four crucial focus areas would-be customer, risk management, doing good and doing well, and relevance to the future.

He then added that banks, in general, would have to reengineer for a new future, and the winners would be those who are able to stay relevant.

He said the balance of power between digital and business had undergone a fundamental change because of the pandemic and that the future belonged to companies that could combine a digital mindset and solid technology to back it up.

Kotak said in future, a ‘winner takes its all’ trend was likely to play out in many sectors.

He further said that his bank was open to acquisitions, but it had to be broadly in the financial services segment and technology-related. He said the bank was focused more on the sustainability of its growth, and much less on steroids for short term quarterly outcomes.