Viswanath Pilla Moneycontrol News
Uday Kotak, veteran banker and Managing Director and CEO of Kotak Mahindra Bank, has warned that the NBFC sector is more fragile than it was a year ago.
"The NBFC sector which saw significant pressure in October-November is beginning to breathe a little better," he said in an annual message to employees of Kotak Mahindra Bank.
"However, I do believe that the NBFC sector is more fragile than what it was one year ago and therefore one has to watch that space carefully in the New Year," Kotak added.
The country's NBFC sector is battling a liquidity crisis, after the infrastructure leasing firm IL&FS with a consolidated debt of Rs 91,000 crore started defaulting on debt repayments.
Saving IL&FS became imperative for the government as it tries to avert a Lehman Brothers-like crisis to prevent the contagion from spreading to other financial institutions such as banks and other NBFCs.
Kotak was given the charge of beleagured IL&FS to turn it around.
"At the end of September/ early October I received a request from the Government to chair as a Non-Executive Chairman for ILF&S, which I was humbled to accept as a national duty," Kotak said.
Kotak also expressed confidence that the financial sector will weather these storms.
"I do believe that going forward, India’s economic trajectory of around 7% p.a. seems to be reasonably in place. The challenge for us is how do we take it to 8%, 9%, 10%, because that is the kind of growth India needs for its very large population," he said.
"Moving ahead, I think the financial sector has seen significant turmoil in 2018. We’ve seen challenges to banks’ balance sheets, 11 public sector banks under prompt corrective action and all these challenges are still playing out. And with corrective action and ensuring that stability and sustainability are the bedrock of our future," Kotak added.
Kotak Mahindra Bank had produced market returns in excess of 20 percent a year even as the index’s returns were barely 3 to 4 percent, he said. But even for a company accustomed to even higher growth rates, there was room for improvement, Kotak added.
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