The banks’ merger was proclaimed last year in August and the union cabinet gave the final approval on March 4. Uday Kotak, Managing Director & Chief Executive Officer of Kotak Mahindra Bank (KMB) on Thursday said that the banking industry leads the way for “consolidation” because of the asset risk in the system.
He says that the sector on a larger basis, without getting into the public or private sector, is going for a greater amalgamation due to the asset risk which the financial sector is carrying. However, the type of merger would rely on pandemic conditions.
Tuhin Kanta Pandey, secretary of the Department of Investment and Public Asset Management (DIPAM) had said earlier that the government’s proposed new policy to have not more than 4 PSUs in each ‘strategic sector’ will likely apply to the banking space too.
From 1st April 2020, the Indian government had directed the consolidation of 10 PSBs into four. Over the period, capital is going to be a major factor in the financial sector. Expertise in capital risk management and the potential to rule institutions on a sustainable basis is much necessary. Also, the supervision and statute had to be unbiased and neutral. The rules and regulations should apply to both public sector banks and private sector banks uniformly.
He also pointed out the necessity of focusing more on the areas of finance, risk, and compliance. However, a conglomerate also has to be very careful of ‘conflict of interest’, he said. Giving the instance of a bank, that also has an asset management business, Kotak said the asset manager should handle distributors ‘independently’.
What’s right according to the customer and type of the business are at the core of the sustainable financial institution,” he said. The mediation by the regulators during the first phase of technical transformation should be minimum. On a lighter note, he said, “There is a joke going around that ‘Y2K’ and success of Indian software happened because the government was not involved
