Demonetization enriches India’s richest banker

Bloomberg

At least one winner has emerged from India’s crackdown on so-called black money: the country’s richest banker.
Uday Kotak, billionaire chairman of Kotak Mahindra Bank Ltd., is reaping broad benefits as the government’s efforts to withdraw the biggest bills from circulation pushes savings into the formal financial sector — including his group’s banking, insurance, brokerage services and asset management businesses.
Kotak’s personal fortune has surged by 43 percent this year to $10.1 billion, according to the Bloomberg Billionaires Index, compared with a jump of 22 percent for the S&P BSE Sensex Index. The 22 Indian billionaires on the index of the world’s 500 richest people have increased their fortunes 32 percent since January 1.
Average assets under management jumped about 61 percent in a year at the group’s investment manager, while the lender’s non-performing loans remain well below the industry average, helping make his bank one of the top gainers on the Sensex this year. Profits at the brokerage and insurance units of Kotak also rose due to the shift of investments into financial assets.
Kotak Chairman is also trying to draw clients with a new banking app called 811 — after the November 8 date on which PM Narendra Modi announced his demonetization policy.
“The financial sector has benefited because informal finance has become formal,” he said in a phone interview from Mumbai. “But in addition to banking, we are seeing even faster growth in asset management. Former financial savings are flowing significantly into financial assets.”
Kotak says that demonetization aimed at fighting corruption by Modi is directing money that was previously in cash, savings or real estate toward the kind of financial assets offered by his bank.
The banker said India’s financial sector is reaching a “tipping point” as private sector banks gain market share in lending from state-owned banks saddled with non-performing loans.