Since the Narendra Modi-government announced the demonetisation of Rs 500 and Rs 1,000 currency notes on November 8 and also cracked the whip on black money, the country has been divided on whether it was a good step or not. While lakhs of people in the country aren't really happy with the policy, there clearly is one person who has benefitted from the cash ban.
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The move has been rewarding for Chairman of Kotak Mahindra Bank Ltd Uday Kotak, whose personal fortune has seen an increase of 43 percent this year to about Rs 648 billion ($10.1 billion), according to the Bloomberg Billionaires Index. Other Indian billionaires on the index too have seen a jump of about 32 percent since January 1, 2017.
So how did the cash ban really help Kotak? The government's move to ban the bigger currency notes resulted in an increase in savings in the formal financial sector, which includes the firm's banking, insurance and asset management services. The assets under management saw a hike of about 60 percent and the brand's non-performing loans remain below the industry average, thus helping it become one of the top gainers in the market.
The group also earned profits from the brokerage and insurance divisions and it also benefited from its banking app 811.
"The financial sector has benefited because informal finance has become formal," Kotak told Bloomberg. "But in addition to banking, we are seeing even faster growth in asset management. Former financial savings are flowing significantly into financial assets."
Kotak explained that while people earlier saved money in the form of hard cash, they are now opting for various kinds of financial assets, which in turn has been beneficial to his firm.
Kotak Mahindra also has a bad loan ratio of 2.6 percent as of June 30 whereas The RBI had calculated the sector average at 9.6 percent as of March 31.
