Building Muscle

Kotak Mahindra Bank is focusing on acquisitions, organic growth and universal banking model to consolidate its position.

- Mahesh Nayak

Paul Krugman once said that whenever banking became exciting and interesting, it got out of hand and jeopardised the entire economy. This seems true if one looks at the 2008 global financial crisis. That’s true for India too. So, when most Indian banks, chasing high growth, were rushing to give loans to infrastructure and capital goods companies during the 2004/08 boom period, the Uday Kotak-promoted bank stayed away.

“We did not participate in the greed. We have been wary of assets that are not adequately collateralised,” says Joint Managing Director Dipak Gupta. The net non-performing assets of 1.26 per cent, among the lowest, reflect prudent lending practices. “It’s not an easy choice. You are sacrificing growth and return in the hope that it will pay off over a period,” he says. And it has paid off. Growth in advances and deposits has been 36 per cent-plus a year over the last three years. Operating profit has grown 32 per cent a year over the period.

Kotak has been a fast learner. It went overboard on retail, especially short-term personal loans, but took timely corrective action. Similarly, it learned its lessons in the stressed assets space. “Buying bad loans and resolving them teaches a lot of things. It made us overcautious,” says Gupta.