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    Need rules for non-disruptive exit in financial sector: Uday Kotak

    Synopsis

    The comments come at a time when the companies in the sector like DHFL are grappling with resolutions and the future of thousands of crore of debt is in doubt. It also comes at a time when cooperative lender PMC Bank is in troubles allegedly because of mismanagement, putting depositors in a difficulty.

    Kotak said there is a greater need for non-disruptive exits in the financial sector, underlining that the leverage is much higher in such companies as compared to the ones in the real sector.
    MUMBAI: Banker Uday Kotak on Friday pitched for rules to enable exits and consolidation in the financial sector.

    Kotak, the head of the private sector lender Kotak Mahindra Bank, said non-disruptive creative destruction is essential for the financial sector to help in winding up of businesses.

    The comments come at a time when the companies in the sector like DHFL are grappling with resolutions and the future of thousands of crore of debt is in doubt. It also comes at a time when cooperative lender PMC Bank is in troubles allegedly because of mismanagement, putting depositors in a difficulty.

    According to reports, the government is mulling a re- introduction of the Financial Resolution and Deposit Insurance Bill, which may address such issues.

    We are at this point of time at a critical juncture to put down the rules of the game on how we will manage exit in a non-disruptive way in the financial sector. This is crucial for our future, Kotak said, addressing a CII event.

    The policy framework needs to have clarity on how we will handle mortality, how we will handle consolidation. We need good rules of the game for entry, but we need good rules for the exit as well, he added.

    Kotak said there is a greater need for non-disruptive exits in the financial sector, underlining that the leverage is much higher in such companies as compared to the ones in the real sector.

    He urged policy makers to take a holistic approach for the development of the financial sector and embrace the free- market model.

    Adopting the free market model may lead to some friction because it may be at loggerheads with the objectives of the nation-state, he conceded.

    He, however, advocated to persist with the same free- market model, pointing that it may look as if there are mad animals in the jungle, but those are essential.
    (Catch all the Business News, Breaking News Events and Latest News Updates on The Economic Times.)

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    4 Comments on this Story

    Sulekha Prasannan247 days ago
    People all is well and we will continue to get these events on a regular basis.Ultimatly the people have to give up their flats and savings. Or you can spend the rest of your lives in front of the courts.Acha din ayeka.
    S Prakash Reddy247 days ago
    The FRDI BILL says depositors also must take a hit for the failure of the institutions. Why should they? Inefficient and corrupt managements, auditors, regulatory authorities are the cause of the failure of the instructions. Why auditors, RBI inspection did not know what was happening in PNC Bank? So also in Yes Bank, Jaypee etc. Don''t make depositors scapegoats.
    baljeet walia247 days ago
    Borrow and don''t return. Deposit and forget. Pay for the Tyrant Borrower.
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