Uday Kotak built the second-largest private bank in India from a tiny lending enterprise that provided inexpensive loans to small businesses. 1000
Uday Kotak’s fortune quadrupled in ten years. He’s India’s wealthiest banker with about USD 15.3 billion. It’s impressive for a non-banker.
Uday Kotak is from an upper-middle-class Gujarati cotton family. He studied at Mumbai University and the Jamnalal Bajaj Institute of Management Studies. His father encouraged him to start a business. He founded a small company lending firms inexpensive loans.
Uday Kotak founded a finance enterprise in 1985, when India’s economy remained closed. Deposit rates were low, but loans were pricey. In an interview, he claimed, “I was shocked to find that triple-A-rated borrowers would get money at 17% when families I knew would only get 6% interest on their money.”
The transformation began with the RBI’s first NBFC banking license.
The sixty-year-old banker single-handedly made Kotak Mahindra successful. His leadership and managerial talents set him apart. He made Kotak Mahindra India’s second-most-valued bank.
Harun Rich’s 2019 list named Uday Kotak Asia’s wealthiest banker and India’s sixth richest. The bank’s share price rose 268 percent in 2019, increasing his net worth from USD 3 billion to USD 11.8 billion. His fortune derived from 30% of Kotak Mahindra Bank.
Uday Kotak’s achievement comes from middle-class values. He said his middle-class principles and common sense shaped his corporate ethics. Going ahead, banks should prioritize caution, simplicity, and humility.
Prudence: He believes’return of capital is more essential than return on capital.’ In 2003, Kotak became the first NBFC bank. Kotak Mahindra Bank outperformed S&P BSE Sensex, which returned 16% between 2009 and 2019, with a CAGR of 35%.
The bank has a USD 48 billion market valuation and a price-to-book ratio of 6.2, more than most banks.
Simplicity: Kotak says banks must make goods simple for clients. Customers must trust.
He thinks bankers should be humble because they handle people’s money.
Kotak profited from a digital-first strategy during COVID-19.
Kotak demonstrated the importance of foreseeing the future before your competition. Kotak Mahindra bank simplified banking before the epidemic. The bank was the first to use video KYC for new clients in May 2020. It allowed a prospect to establish an account on their smartphone in 10 minutes.
For MSME loans, the bank uses e-sign, a paperless documentation method.
The bank’s digital-first strategy includes these.
Uday Kotak strengthened Kotak Bank by acquiring ING Vysya. He believes you must seize opportunities.
RBI governance rules required Kotak to reduce his bank ownership from 30% to 15% in 2014. Instead, Kotak bought ING Vysya for USD 2.4 billion, substantially doubling the bank’s fortune and share prices.
He leads wisely.
Speaking of Uday Kotak, Anand Mahindra stated, “As far as I’m concerned, becoming the world’s richest banker is only a proxy for Uday being one of the world’s smartest bankers.”
Kotak Bank’s shares outpaced their peers, therefore it’s true. Kotak controlled asset quality better than others before the epidemic. He cut riskier and small-business loans. When borrowers’ repayment capacity dropped owing to the epidemic, Kotak was the first to raise market funding. He predicted the crisis’s severity, helping the bank gain customers’ and investors’ trust and continue expansion. Kotak Bank shares rose 17%, the most among his rivals.
With a robust balance sheet and low bad-loan ratio, Kotak avoided the shadow-banking crisis in 2015. In 2020, the bank had the second-lowest bad-loan amount.
Uday Kotak went from a modest lender to India’s most successful private banker thanks to his vision, adaptability, market knowledge, and corporate governance.
Anand Mahindra added, “More importantly, he’s understood that what makes a bank sustainable and durable is not just smart strategies but unassailable governance.”
Uday Kotak has led Kotak Mahindra Bank since its founding. The bank’s success is due to his steady rise and rigorous corporate governance. He limited lending to hazardous areas and focused on mortgage-baked lending to assist the bank maintain a clean balance sheet. What happens when the sixty-year-old banker retires?
