Message from Uday Kotak

Dear Friends, India has once again reposed faith in Prime Minister Narendra Modi’s vision for a new India. As we undergo a significant structural political transformation of India, it is now time for us to focus on the economic transformation.


CASA Ratio

7,300 crore

Embedded value of our life insurance business

A strong and stable government is the foundation of this journey. Can this be India’s decade?

While there are significant global headwinds, I see two positives which can work in India’s favour: softer commodity prices, particularly oil (~USD 62) and low global interest rates as reflected in 10-year US Treasury yields at 2.12%. However, India faces some economic challenges. Slowing GDP growth and limited fiscal space are some of them. In the past years, the challenges of the real sector impacted the financial sector. Now, the reverse is also true.

Despite these challenges, it is an opportune moment to defy gravity of normal economics. We need to take bold steps to reform the financial sector, the real and social infrastructure, remove bottlenecks in different segments and unleash the economy for significant growth in the years to come. We currently stand at around USD 2,000 per capita GDP. China’s per capita GDP is now four to five times compared to India’s. India needs to move to double digit growth.

History repeats itself?

Now, for a moment let me step back and recapitulate the events that marred the global financial markets over the past two decades. I notice a ten-year cyclical pattern.In 1998, the South East Asian crisis brought down the tiger economies like a pack of cards. The hitherto view that the Indian economy was fairly insulated from global events as the Indian currency was not convertible on the capital account was belied. From a universe of about 4,000 non-banking financial companies (NBFCs) in India, barely 20 survived then. Fast forward to 2008, we witnessed the Global Financial Crisis – the financial market events in the Mecca of capital markets, USA, severely shook the foundations of all economies. India too did not escape, which again establishes the point that India cannot remain insulated from events impacting global economies. 2018 witnessed tremors once again in the Indian financial sector. I see 2019 and 2020 as years to cleanse, repair and nurture Indian financial institutions. We have work cut out for both practitioners and policy makers.

Through turbulent times, a well-capitalised balance sheet, constant sniffing between risk and returns and early recognition of problems are our financial and cultural compasses.

The financial sector has issues of its own

The major issue talked about is liquidity. However, I see it as the price of liquidity. Concerns on solvency in some cases are also weighing on the markets. I do not at this stage see this as a systemic risk and am confident that the policy makers and regulators will take steps to manage the situation. As regards the price of money, we need to bring down deposit rates of banks for better transmission. However, high rates on government savings schemes, distortion in yields due to differential tax treatment on debt instruments, are the challenges in the reduction of deposit rates. Further, multiple levels of taxation on equity are leading to a high cost of equity. Time has come for Indian entrepreneurship to get back some of its animal spirits. At the same time, this is a new India where governance and transparency will be the pillars of progress.

Courage of Conviction. Constancy of Change.

Our current annual report’s theme – ‘Courage of Conviction. Constancy of Change’, captures our core ethos and values, which have held us in good stead. We navigate through the challenges of the financial sector with a sense of optimism for the future. Basic tenets of our philosophy continue to revolve around:-


Low cost and stable liabilities


Lower financial risk but high franchise value businesses


Growing the risk book without diluting risk adjusted returns


Embracing the new world of digital, analytics, AI and technology

Keeping the entire spectrum of customers at the centre of our world

Culture of prudence, simplicity and humility continuing to reflect on our values

Report card

I am happy to report to you that as of 31st March, 2019, our CASA ratio reached 52.5%. We are not obsessed with a number. We would like to see it continue to grow. We are also glad to report that our focus on retail deposits, particularly, deposits below ₹ 1 crore, continues. These deposits have grown by more than 30%, reflecting our core philosophy.

Through turbulent times, a well-capitalised balance sheet, constant sniffing between risk and returns and early recognition of problems are our financial and cultural compasses. We are also seeing a continuing opportunity to gain market share. Moreover, we are seeing an ability to get better pricing for risks we are taking, which reflects in our growth in loan book as well as in our net interest margins. We are equally committed to the broader financial services business, including our life insurance and asset management businesses.

I am happy to report a very significant growth in embedded value of our life insurance business from ₹ 5,800 crore to ₹ 7,300 crore. And our margin on new business at 37% is probably the highest in the life insurance industry. We have seen a very good growth in our mutual fund business. At the same time, our relentless focus on pure banking at the heart of financial services continues.

I conclude by saying that we see a sustained growth opportunity for our range of financial services businesses and are constantly exploring new opportunities.

I thank all our investors and stakeholders for their continued belief in our story as we move forward on a challenging and exciting path ahead.

With warm regards,

Mumbai5th June, 2019