Health of Banks - A critical view from Banker
Observations of Shri . Uday Kotak, head of Kotak Bank, on Indian banking system in his message to the shareholders is most relevant and apt. Following are the main points. Among the lessons from the problems in banking sector, banks should understand they are not private equity investors and recovery of money should be at the heart of lending. “Return of capital is more important than return on capital. If banks think they cannot recover money, they should not lend in the first place,” he said, while suggesting a serious overhaul of the recovery mechanism in the country. He also blamed the banks for “postponing the pain” for the last many years, saying it has had a ballooning effect on exposures. Kotak further said, “Banks were nationalised 47 years ago. One of the reasons for this was that private banks were lending disproportionately to big businesses. Access to funds from banks was not easy for the common man. “Nationalisation was supposed to change thi