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New banks to herald next growth phase for existing ones: Kotak

Last Updated: Sunday, June 16, 2013 - 12:33

New Delhi: As dozens of banking licence aspirants line up before RBI, eminent banker Uday Kotak has said the entry of new players could herald a new round of growth for the existing players with increased pace of competition for talent as well as customers.

"As I look back at the time when we became a bank in 2003, our private sector peers had a major takeoff in the period post 2003. I hope the potential entry of new banks is a tipping point for our next round of growth," Kotak Mahindra Bank's chief has said.

RBI has initiated the process to grant new banking licences after a gap of nearly 10 years. Kotak Mahindra Bank and Yes Bank were the last two entities to get banking licenses from RBI in 2003-04.

For the new licences, RBI has invited applications from interested players till July 1, although the process of granting licences and the actual entry of new players might take much longer.

Talking about the potential entry of new banks, Kotak said in his annual letter to the shareholders that the Indian financial space was likely to see new banks in the next two years. "How will they affect us (Kotak Mahindra Bank)? They will increase the pace of competition for talent and customers," he said.

He added: "However, going by our experience of the last 10 years, banking, particularly on the retail side, is much more long-haul than we expected when we began our journey.

"With increasing complexity, I wonder whether we would have plunged into banking today as decisively as we did 10 years ago. I see the entry of new banks as an opportunity for us to sharpen ourselves and have our adrenaline flowing for higher aspirations."

Kotak also stressed that the one "fundamental change ripping through the Indian financial sector" at the moment is about the "the customer, values and ethics".

He said: "Appropriate products and right advice are the cornerstones of the future. It is here that we need to align employee behaviour and culture to customer needs.

"I think the future battle in financial services will be won or lost around customer orientation, technology and risk management, combined with a strong people culture."

Recalling the genesis of the global financial crisis in 2007-08, Kotak said the root causes of the problem were excessive leverage or lack of prudence, complex creative products or lack of simplicity and bankers believing that they are the masters of the universe or the lack of humility.

"As Indian banking, particularly the private sector, gains share and becomes a larger proportion of market capitalisation and of the Indian economy, banks need to keep these principles in mind at all times and not repeat the mistakes of history," he said.


First Published: Sunday, June 16, 2013 - 12:33
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