Kotak Mahindra Bank opposes 100% FDI in banking; says Indian savers must benefit

10. Kotak Mahindra Bank | Market Cap for the week ended October 30: Rs 3,06,331.09 crore | Loss during the week: Rs 32,570.94 crore.

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Banking is a core part of the Indian economy and earnings from the sector must benefit Indian savers rather than be moved out of the country into the pockets of foreigners, according to a senior executive at Kotak Mahindra Bank.

“I think you have to make up your mind whether banking is intrinsic to the economy and if it is, then do you want all earnings which is intrinsic to be exported? You’d rather have Indian savers get the benefit of growth in our structural economy sector," said Dipak Gupta, joint managing director of the bank.

“Banking, whether you like it or not, is sort of a bellwether in terms of where directionally the economy moves. Hence it is not appropriate to be 100 percent,” he told reporters in post-results press conference.

Reports from earlier this week suggested that the government is thinking of increasing FDI up to 100 percent in private sector banks and 49 percent in public sector banks.

In December, Kotak group’s promoter and chief Uday Kotak said that Indian savers have lost out on capitalising returns from large private players such as HDFC Bank due to its foreign ownership at a time when the financial sector is witnessing a major transformation.

Kotak said that in the case of HDFC Bank, whose foreign ownership is around 50 percent or more, its growth from Rs 500 crore in early 1980s to Rs 2.80 lakh crore today, has benefited savers in other parts of the world more than in India.

“On a more fundamental basis, India in order to fund its P&L thereafter has raised a disproportionate level of equity and in a globalized world where global equity was easy, India found it feasible to fund these balance sheets. But this equity has come with a cost," he said.

Currently, foreign investors are allowed to hold up to 74 percent in private sector banks.

Mounted with high bad loans of over Rs 8 lakh crore, the banking sector is on an aggressive path to clean up its balance sheets, hoping to march on path of growth as the government makes plans of more capital infusion in public sector banks through recapitalisation bonds.