We must avoid market bubbles through policy & regulation: Uday Kotak
investors, it is important to ensure that market bubbles are avoided through policy, regulation, education and supply of good quality securities, said Uday Kotak, founder, Kotak Mahindra Bank.
Outlining a financial sector model for 9% annual growth and a GDP of $30 trillion by 2047 on microblogging platform X, Kotak said on Friday that a tussle between the «saver/borrower» and «issuer/investor» model was currently underway.
«Many investors have joined post Covid. They have mainly seen upside.
While the situation is not comparable at present, we need to keep Japan of the 80s at the back of our mind. Its Nikkei Index peak was 1989.
34 years later with near zero interest rates, the Nikkei is still below its 1989 peak,» he wrote.
The veteran banker said that as more savers turn into investors, the banking sector faces challenges on garnering deposits and cost of funds. «The large corporate sector has to meaningfully move to capital markets (debt and equity) and away from banks.»
Predicting that banks would become distributors of corporate debt rather than storage houses, he said that lenders would need to penetrate mid-sized corporations, micro, small and medium enterprises, and consumers.
While urging companies to raise equity at lower cost of capital for productive purposes, Kotak highlighted the need for India's debt markets to grow.
He said that the prevailing gap on the highest marginal tax rate between debt and equity of 39% and 10% was «perhaps too wide».
Calling for a fresh look at double taxation on dividends, he said that a shareholder was like a partner and that there is no additional tax when money is moved from the partnership to the partner's capital account. «Same principle applies to shareholders,» he
