Uday Kotak, Managing Director, Kotak Mahindra Bank (reportedly one of the country’s biggest buyer of stressed loans) has said that the extent of bad loans of state-controlled banks has not been identified correctly. He also added a time period of 12 to 18 months may be required for these banks to accept the precise evaluation of their stressed assets.
Outgoing RBI Governor Raghuram Rajan was keen on restructuring the banking sector and recognition of bad loans however with his exit may slow down this process may slowdown which has a number of not state lenders in a worrisome situation. ICICI Bank and Axis have reported heavy losses whereas non-performing assets of Kotak Mahindra, the country’s third-biggest non-state bank by market capitalisation, stood at 2.1 per cent of its loan book at the end of March.
Kotak also questioned whether nationalisation of banks served the purpose of checking disproportionate lending to big businesses, as most of the stress on their books is today due to loans to big corporates. He also blamed the banks for "postponing the pain" for the last many years, saying it has had a ballooning effect on exposures. He added forced mergers, as practiced in past, may not be possible for public sector banks anymore due to their huge NPAs. “One of the reasons for this was that private banks were lending disproportionately to big businesses. Access to funds from banks was not easy for the common man. "Nationalisation was supposed to change this. Today’s irony is that the biggest losses booked by banks, including public sector banks (PSBs), are on account of lending to big businesses. Effectively, public policy actions supposedly done 'in public interest' are instead going 'against public interest.”
