MUMBAI: It is imperative for the financial sector practitioners and policymakers to see to it that the financial sector challenges do no impact the real economy, Uday Kotak, vice-chairman, Kotak Mahindra Bank, told reporters at a press conference to announce the bank’s fourth-quarter results. “For a long time, there has been a discussion on the impact of the real sector challenges on the financial sector, but this time, we are talking about the challenges in the financial sector and its impact on the real sector and the broader economy.
Next six months would be crucial as to how India handles its financial sector,” Kotak said. “We, therefore, need to have a very strong approach both from the points of view as practitioners and policymakers, take the financial sector to safer waters from the more turbulent waters that it is in now,” he said. “We have to try and avoid that financial sector challenges do not affect real sector.”
There hasn’t been any major blow up in the financial sector since IL&FS crisis last September and early on in the current fiscal; there is still hope that a 7 per cent GDP growth is feasible, he said. Speaking about the auto sector and the slowdown the passenger car industry is going through, Kotak said the apparent reason seems to be the availability of finance, but there is a need to ask if there is something structurally changing for the industry.
“Is there a fundamental structural change in the behaviour of the consumer? Then it is a structural change that we as an economy need to take note of. If some of that structural change is playing out, then we need to be ready for a new world,” Kotak said. There are three ways the financial sector can get out of the challenges, one is through getting new equity; two, through combinations (mergers); the last through mortality (liquidation), Kotak said. “Hopefully not too many through mortality,” he added.