PSU banks’ divestment will consolidate sector

Kotak was speaking with TNIE Editorial Director Prabhu Chawla during e-expressions, a TNIE series of live web casts with people who matter.
Uday Kotak , president of the Confederation of Indian Industries(CII) and  CEO of Kotak Mahindra Bank. (File photo | PTI)
Uday Kotak , president of the Confederation of Indian Industries(CII) and  CEO of Kotak Mahindra Bank. (File photo | PTI)

Hailing the announcement of Finance Minister to privatise two PSU banks as a bold move as part of measures to realise the Rs 1.75 lakh crore divestment target, Uday Kotak , president of the Confederation of Indian Industries(CII) and  CEO of Kotak Mahindra Bank, said the historic decision would effectively help the State Bank of India and the four merged banks to consolidate.

Kotak was speaking with TNIE Editorial Director Prabhu Chawla during e-expressions, a TNIE series of live web casts with people who matter. He said that he could not recall any incident of the government privatising banks throughout his career. “It’s like the bigger banks like SBI and the merged banks would consolidate, while the government tests waters by privatising smaller ones,” Kotak said. Responding to a query whether India would be able to achieve its divestment target, considering its poor track record, Kotak said that the announcement in the Budget was a very bold step, which would further consolidate the banking and financial services sector.

Hailing the Budget as transparent, with pro-private enterprises and pro-market stance, Kotak said that slowly the country was now opening up to reforms.  “Across board, small and big enterprises have to take risks, create jobs while the government is with them. For me, the only thing I did not expect in Budget was no hike in taxes,” he said. Kotak said normalisation of fiscal deficit will take place over the next three years. “We have to look at signs of our times. Coming out of the pandemic, the thrust was to save lives and livelihoods. At this point, a sudden tightening of the fiscal deficit wouldn’t have been appropriate. 

The deficit for the FY21 pegged at 9.5% GDP is certainly higher than our estimates of 7.5%,” he said. However, the financial numbers in the Budget 2021 exhibit more transparency, especially when it comes to food subsidies. The CII President said that some deficit was certainly there in previous budgets, but the governments didn’t show them to the public. Kotak welcomed the bigger allocation to the Capex saying that this is going to bring sustainable growth. Notably, India has hiked its capital expenditure by 34.5% to Rs 5.54 trillion in FY22, which will constitute 15.9% of the overall spending.

While the  Centre announced that it will stick to its Rs 12 lakh crore market borrowing plan for this fiscal, an increase of more than 50% of Budget estimates, Kotak said that the borrowing is  from future generations. Hence, it is our duty to invest in the right kind of assets which generate returns over in future, he stated. Kotak noted that a very close coordination between govt and RBI is also needed to ensure that during the transformation there is no overcrowding of investments financing by private sector. 

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