MC Interview: Kotak Mahindra Bank bullish on SME vertical as next growth engine, says wholesale banking head Paritosh Kashyap

I have worked at Kotak Mahindra Bank now for close to 28 years and had the privilege of working very closely with Uday Kotak for a long time. He is one of the most brilliant professionals. He provides a lot of freedom to people to work and has put in one of the best governance structures.

Uday is someone you call ‘walk-the-talk’, he will lead the way for people, and his ability to get into the minutest details while still staying on top of everything — the vast empire that he had built.

So every call that we used to have with him in addition to regular quarterly reviews, etc, he would call for something, and within five minutes Uday would do the review of the full business on a call. So that kind of his ability to get into details.

What kind of growth is expected in the SME vertical?

I would say SMEs are the future for most corporate banks. We believe that as our corporate philosophy, we want to grow granular business, assets and liabilities. For us, SME is going to be the engine of growth.

We are currently growing at closer to 20 percent and intend to grow faster than that. And we believe that that segment has not really seen any defaults. And with the growth in an economy where India is growing at a very fast pace compared to some of the global economies, we think being with SMEs will be good for us, and we want to continue to focus on them.

How are you approaching the issue of cybersecurity?

When people deal with digital, when you do transactions online, there are risks associated with that. So both at the user end and at the bank end, we need to be extra careful. So as a bank, whenever we launch any application or any new facility for our customers, we put a huge emphasis on cybersecurity and we ensure that multiple levels of checks are done and that we provide resilience. We put a huge emphasis on the security and resilience of our systems so that our customers not only get the best banking experience, they also get the best banking experience in a very safe and secure environment.

How is the corporate lending portfolio performing at this point?

In 2017-18 RBI came up with the Stressed Asset Framework, thereafter, effectively the overall corporate environment has become more cleaner, more governance-oriented. This means as a corporate when you do accounting for your transactions you have to be very careful of your reporting. So not only the regulatory changes, but even accounting changes are helping, overall disclosure standards have increased. So the overall corporate environment has become much better. Since 2017-18, a lot of regulatory changes have come in which have really helped corporate banking, this is around both stressed assets and better regulatory reporting. And this has effectively helped banks to have better control of their credit quality, and corporates also realised that they need to know.

Since banks have far more powers for taking companies to the NCLT (National Company Law Tribunal), the behaviour has also improved, which is visible in the quality of the credit portfolios of most of the banks.

What are your thoughts on the interim Budget 2024-25?

I think the interim Budget is typically a vote on account. So, normally governments do not have significant measures in the interim Budget. It's more continuing the government. For running the government, they need to approve certain expenses and budgetary allocations, etc. So it's going to be a non-event in my view, and unlikely to see any announcements in the interim Budget.

How do you see competition from foreign banks?

Corporate banking is a large business in India. And I would say we do not really see so much competition from foreign banks. Both domestic private banks and public sector banks have very deep, large balance sheets. It's deep enough for large corporates, and small-scale enterprises to raise their financing requirements within the country. In fact, in the last two years where swap rates have not been favourable, we're not really seeing too much foreign borrowing by various corporates including very large corporates.

Some of the foreign banks are also active in India, but I would say public sector banks and private sector banks are much larger players. Competition is very intense. That's because the credit offtake is not too large and every bank wants to grow, including us. So, I would say the competition is too intense. Sometimes it borders on irrationality, that's the market. Good for the corporates.