Uday Kotak pegs banking stressed assets at Rs 14 lakh crore

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26 Aug, 2025 12:21

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The banking industry has an opportunity of Rs 10 lakh crore worth of bad loans at fair value after providing for a loss of Rs 4 lakh crore from the total stressed assets, according to Uday Kotak, Vice chairman and MD of Kotak Mahindra Bank.

"Based on our internal research, net of provisions made on gross non-performing loans (NPLs), the total stress in Indian banking is about Rs 14 lakh crore," Kotak said.

The stressed assets include all net NPLs, assets under various resolution schemes such as SDR (strategic debt restructuring), S4A, those with assets reconstruction companies (ARCs) and other restructured assets.

With a roughly 30 percent estimation, he said, "Out of Rs 14 lakh crore, Rs 4 lakh crore is the further pain which we believe the banking system has to take."

The Rs 4 lakh crore is 50 percent of total capital of Indian banking industry today, he added.

With a capital base of about Rs 8 lakh crore to solve Rs 10 lakh crore worth of bad loans, Kotak said the challenge in the Indian banking system is the need for strategic capital and strategic management.

"I mean, 2-3 well-capitalised bad banks is what I see as the way we should be thinking," he said adding that Kotak is prepared to take that opportunity.

He pointed out that ARCs are "horribly under-capitalised".

Kotak added that with the banks loss of Rs 4 lakh crore and additional Rs 2.5 lakh crore for resolutions converts to a USD 100 billion worth of capital requirement.

Grabbing this is an opportunity for the private sector to enter resolution and turnaround, he said, "We'll be ready to take more risks, including on our loan growth and the book, provided it meets our risk adjusted returns."

Kotak has been buying stressed assets since 2003 and hence, can understand the business well.

On Wednesday, at the 10th floor office of Kotak Bank in Mumbai's Bandra Kurla Complex, media professionals beyond the banking sector showed presence anticipating a big acquisition announcement.

However, even as the expected announcement wasn't made, Kotak launched "811" signifying the day of cash ban implementation - 8th November (11th month).

Kotak calls 811 the WhatsApp moment of Indian banking - a digital channel that helps one "download a bank account" with zero balance and no charges on making payments, etc all by using an Aadhaar-based OTP (one time password).

According to him, creative disruption and giving what the customer needs will drive growth in the near future. An optimistic Kotak also mentioned that he is seeing a pick up in the economy and that India can move sustainably to 8-10 percent growth but "requires significant private investment, a bold one with animal spirits".