'Must attract more risk capital for 7-8% growth rate'

Need to attract more risk capital for 7-8% growth rate: Uday Kotak

Managing Director of Kotak Mahindra Bank, Uday Kotak. (PTI Photo)

If the country wants to achieve a growth rate of 7-8 per cent, it needs to attract more risk capital by building trust among lenders, savers and investors, veteran banker Uday Kotak said on Friday.

This trust, he said, can be built through the strengthening of corporate governance by companies.

"If we aspire for 7 per cent or 8 per cent or 9 per cent growth, changing the mindset on risk capital and building that trust bridge is core to our future," Kotak, who is managing director and CEO of Kotak Mahindra Bank, said at a CII corporate governance summit.

Growth in the September quarter slowed to a more-than-six-year low of 4.5 per cent.

Kotak cautioned that lack of trust towards corporates may be leading to the risk aversion.

He said the country is scarce on risk capital and access to such capital will not come easily unless lenders, savers and investors trust companies where they are putting in their money.

"The most important aspect of corporate governance we need to focus on is building trust in the mind of any lender, saver, investor that his or her money is safe, and will produce returns which are justifiably and not be taken away by poor governance at the company level," he said.

The recent defaults or delayed payments by corporates in the country have made savers worry about their investments, including in debt instruments, making them more risk averse.

Kotak said besides investors, the risk aversion has affected the minds of fund managers, who are buying stocks with better price-to-earnings (PE) ratio rather than of small cap and mid-cap companies.

"It is feared that there maybe something in those companies which we do not know. We don't necessarily trust their numbers, the group company's transactions and what the board members maybe doing. So, this lack of trust is leading to an outcome of a risk aversion," he said.

Speaking on the occasion, UK Sinha, former chairman of Sebi, said that corporate India must gauge horizontal trends of global developments and keep up with them to remain globally relevant. 

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