Kotak Mahindra Bank<\/a> (KMB), on Thursday said the banking sector was headed for \u201cconsolidation\u201d due to the asset risk in the system.\u00a0 \u201cThe sector on a broader basis, without getting into public or private sector, is heading for a greater consolidation because of asset risk which the financial sector is carrying,\u201d Kotak said.<\/p>\nThe observation was made at the global fintech festival\u00a0 in response to a question from Bank of India chairman G Padmanabhan. The nature of the consolidation, however, would depend on the Covid-19 situation, Kotak observed.
DIPAM secretary Tuhin Kanta Pandey had earlier told FE the government\u2019s proposed new policy to have not more than four PSUs in each \u2018strategic sector\u2019 will likely apply to the banking space too.<\/p>\n
The number of public sector banks (PSBs) could be brought down to four from 12 via privatisation or consolidation. The government had already directed the merger of 10 public sector banks into 4 from April 1, 2020. Kotak also said, over time, capital was going to be critical for financial sector. \u201cWhat is needed is capital risk management expertise and an ability to govern institutions on a sustainable basis,\u201d he said. He also said policy supervision, regulation and governance had to be ownership-neutral. \u201cThe principle of governance should apply to both public sector banks and private sector banks in the same manner,\u201d he said.<\/p>\n
He also highlighted the need for strong group oversight specifically in the areas of risk, finance and compliance. However, a conglomerate also needs to be very conscious of \u2018conflict of interest\u2019, he said. Giving the example of a bank, that also has an asset management business, Kotak said the asset manager should handle distributors \u2018independently\u2019. \u201cThe principles of \u2018dharma\u2019 of what is right with reference with customer and nature of the business are at the core of sustainable financial institution,\u201d he said.<\/p>\n
According to Kotak, there should be less intervention by the government in the initial journey of digitisation. On a lighter note, he said, \u201cThere is a joke going around that \u2018Y2K\u2019 and success of Indian software happened because the government was not involved.\u201d\u00a0 He further said, \u201cLet\u2019s not be interventionist, if the marketplace is developing well.\u201d<\/p>\n
![\"\"](\"https:\/\/images.financialexpress.com\/2020\/06\/1-53-620x413.jpg\")
![\"\"](\"https:\/\/images.financialexpress.com\/2020\/04\/telegram.png\")