Uday Kotak, executive vice-chairman and managing director of Kotak Mahindra Bank
believes that the bank’s focus in Dubai and the region is to add value to the savings and
investing propositions of its customers. He said at a time when the whole world is going
through turmoil, India-centric customers are confused about where to invest.
Source : Gulfnews : Babu Das Augustine:Deputy Business Editor Staff Report:: 12Dec 2011
Dubai: The Kotak Mahindra group is one of India's leading financial services conglomerates. The group has a consolidated net worth of about $2.4 billion (Dh8.8 billion) as of September 30, and has a wide distribution network through branches and franchisees across India, and international offices in London, New York, California, Dubai, Abu Dhabi, Bahrain, Mauritius and Singapore.
In a recent interview with Gulf News, Uday Kotak, the executive vice-chairman and managing director of the Kotak Mahindra Bank, spoke about the emerging role of Dubai as the financial hub of India and the bank's plans for the region.
Gulf News: You have had a long presence in Dubai. How important is Dubai in your international business, particularly in the context of your expansion into the Middle East?
Uday Kotak Dubai was our first foray outside India and dates back to 1995. We believe that was a great decision. Over time our business in Dubai has continued to grow and today we have four licensed entities operating out of here. In the region we have a presence in Abu Dhabi, Bahrain and Muscat. I think the whole of the Middle East gets effectively covered from Dubai.
Our focus in Dubai and the region is to add value to the savings and investing proposition of our customers. At a time like this when the whole world is going through turmoil, India-centric customers are confused on where to invest.
The West is facing massive uncertainty, many individual investors are not yet ready to invest in China and not many markets and asset classes are available to these investors. Thus, a huge amount of money is still moving to India despite India facing its own share of challenges.
In recent years, has there been any significant increase in foreign investors from this region seeking investment opportunities in India?
We have seen big interest in India from institutional investors and high networth category of individual investors from the region. But in recent months all classes of investors have been risk averse and many are turning to safe avenues. Right now the big rush is to put money in very simple fixed deposits.
We have seen huge inflows of money into fixed deposits, particularly rupee deposits that are earning 9.5 per cent.
How is the high interest rate environment in India impacting the profitability of your commercial banking business and banks in general?
When talking about interest rates in the country, we have to keep in mind the persistently high levels of inflation in the country and the rate hikes were inevitable. This has definitely slowed down economic growth. For this year the growth is forecast around 7 per cent and about 6.5 per cent next year. Credit growth is estimated at about 15 per cent. We expect inflation to be down to about 7 per cent by March from the current levels above 9 per cent.
How has the economic environment in the country affected your profitability and non-performing loans (NPLs)?
We have continued to have one of the highest net interest margins (NIMs). We also continue to have a very good track record on NPLs.
Although we have had close to 30 per cent credit growth, we have been able to maintain tight discipline on asset quality.
Compared to any other Indian bank we probably are sitting on the highest capital adequacy ratio at about 18 per cent with tier 1 ratio at 16 per cent.
Although the overall banking system in the country may have some pressure related to NPLs, we are well positioned to continue to grow at 25 to 30 per cent.
How has the recent remittance flows from the region helped your bank?
The volumes have been so good that we are probably doing much better business this year than two, three years combined.
At 9.5 per cent, aren't these remittance linked fixed deposits expensive for you?
With RBI repo rates at 8.5 per cent, even in the domestic market we are paying same rates to borrow. At the end of the day the floor rate is set by the RBI and our lending rates will reflect the cost of funds.
Saudi and Qatar are two important markets in the Gulf; do you have any plans for these markets?
Saudi is undoubtedly a large market. The regulations are extremely tight and they are not issuing banking licences.
The CMA (Capital Market Authority) licences are for distribution of products and managing assets locally. We are weighing various options. We would definitely want to get deeper into the Middle East because it is a great market.
How do you see Dubai's role as a financial centre for India? Can Dubai play a similar role like Hong Kong does for China?
I think there is a great pot-ential for Dubai to become India's and the entire Middle East's Hong Kong in terms of capital raising and taking advantage of investment opportunities in India. Some of the leading sovereign wealth funds in the region are already using our DIFC operations to invest in India and Indian corporates are tapping liq-uidity from the region.
We are working on getting more Indian companies raising money through Dubai and structuring, private equity and mergers and acquisition deals. I would like to see Dubai campaign to establish itself as India's leading overseas financial hub.
A stronger regional presence
Dubai: Kotak Mahindra group entered the UAE market in 1995 and currently has two entities in the Dubai International Financial Centre (DIFC), both regulated by the Dubai Financial Services Authority (DFSA), and two more entities as Representative Offices under the UAE Central Bank.
In January 2010, Kotak Mahindra Financial Services Limited (KMFSL) was set up as a 100 per cent subsidiary of Kotak Securities Ltd with the objective of providing wealth management services to professional clients.
Kotak Mahindra (UK) Ltd — Dubai branch was set up in November 2005 in the DIFC.
KMUK is registered with the Securities Exchange Board of India (Sebi) as a Foreign Institutional Investor (FII) and specialises in providing asset management services to overseas investors seeking to invest in India through funds domiciled outside India.
The Kotak Mahindra group in addition has two representative offices in the UAE, one in Dubai — that of Kotak Mahindra Bank Ltd and the other in Abu Dhabi — that of Kotak Mahindra International Ltd.
The group has partnered with local banks in the Gulf to make its services available to Non-Resident Indians (NRIs) and other high networth individuals (HNI) within the region.
