Bad times are not yet over for banks, says Kotak chief

New Delhi: Warning of “more bad news” on the  stressed loans front in the Indian banking sector, eminent  banker Uday Kotak has said that its “weak underbelly” has resurfaced strongly and the troubled times are is not over yet, though  banks have begun cleaning up their books.

Mr 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.

In his annual message to shareholders, the Kotak Mahindra Bank chief also pitched for an ‘exit mechanism’ for the sector, saying forced mergers, as practiced in past, may not  be possible for public sector banks anymore due to their huge NPAs.

Mr Kotak, who is known as one of the most vocal voices within Indian banking industry including about its own perils, said he sees a “well-settled government” in the country, but  it “could do more to build confidence and trust among  businessmen and rekindle animal spirits into the economy”.

“The last financial year saw the Indian economy stretched  between two ends of the string, good macro tailwinds but a  difficult micro situation,” he said, adding that inflation,  current account and fiscal deficit were all under control, but  many sectors and businesses struggled.

“This scenario is likely to change from hereon. With Brent crude recovering to $50 levels, the benefits of lower prices will  reduce, and this has the potential to increase our current account deficit,” he said.