(Bloomberg) – Without a cricket accident that nearly killed him, Uday Kotak probably wouldn’t be the richest banker in the world.

A bullet that hit him in the head and led to emergency surgery prompted a 20-year-old Kotak to abandon his dream of becoming a professional player. After a brief stint in the family cotton trading business, he pursued his MBA at the prestigious Jamnalal Bajaj Institute of Management Studies in Mumbai before entering finance in 1985 at the age of 26.

Kotak, now 61, has an estimated fortune of around $ 16 billion, according to the Bloomberg Billionaires Index.

As India grapples with a parallel lending crisis, its Kotak Mahindra Bank Ltd. has managed to differentiate itself, gaining investor confidence by starting to slow lending to riskier sectors more than two years ago and maintaining good corporate governance. When the coronavirus pandemic added to the industry’s woes by eroding the repayment capacity of borrowers, the company was one of the first to raise capital to strengthen its balance sheet, helping to build investor confidence that it will be among the biggest winners as the country emerges from its Covid-induced recession.

The strategy has paid off: As lenders have plunged into the world, shares of Kotak Mahindra Bank have risen 17% this year, the highest among their Indian peers, and Kotak has just extended his tenure as director. general of three years. A cabinet representative did not respond to requests for comment.

“As far as I’m concerned, becoming the richest banker in the world is just one indicator that Uday is one of the smartest bankers in the world,” Anand Mahindra, chairman of the Mahindra group, told Mumbai, whose link with Kotak in 1986 led to the name of the company. “Most importantly, he understood that what makes a bank viable and sustainable are not just smart strategies, but unassailable governance. “

Kotak’s company stands out in a country where lenders have some of the worst bad debt ratios in the world. The problems for businesses began to occur in 2015, when the Indian regulator launched a massive audit that uncovered hidden sour loans. This led to a parallel banking crisis that strained the economy as a whole and further hurt asset quality scores and earnings.

Kotak Mahindra Bank, however, has been able to adapt. It cut loans to small and medium-sized businesses and unsecured individuals. Its shares have grown by more than 24% in each of the past three years.

Although its bad loan ratio increased in 2020, it ranked second among its peers with its capital adequacy score being the highest. The country’s second-largest lender by market value announced an unexpected profit increase of 27% in the quarter ended September 30.

The company received another boost last month, when the central bank offered to increase the founders’ ownership limit, reducing the risk that Kotak would be forced to dilute its 26% stake in the lender, as l previously asked the Reserve Bank of India.

Kotak, from the western state of Gujarat, started an investment company in 1985 with a loan of 3 million rupees ($ 41,000) from family and friends and partnered with Mahindra the following year. . The company, which began by discounting bills, then expanded its loan portfolio, branched out into securities brokerage, investment banking, insurance and mutual funds. She converted to a lender in 2003 after getting the go-ahead from the RBI.

The financier has been the CEO of Kotak Mahindra Bank since its inception and took further control in 2006 by ending a decade-long partnership with Goldman Sachs Group Inc. He rose through the ranks by maintaining strong banking practices. underwriting and avoiding lending to riskier sectors. , instead focusing on expanding collateral-backed loans for farm equipment, mortgages and vehicles, according to Deepak Jasani, head of retail research at HDFC Securities Ltd.

As the RBI just approved the extension of the Kotak CEO’s tenure – despite the earlier proposal to cap the tenure of senior executives at private banks – investors are starting to wonder what will happen after he relinquishes the reins .

Unlike many family businesses in India, Kotak has avoided putting family members on the lender’s board of directors or in managerial positions. This has helped maintain investor and depositor confidence in a country where lack of corporate governance and transparency has already brought down three banks and pushed two shadow lenders to bankruptcy in less than two years.

“It’s all the time,” said Ananth Narayan, a former banker and now associate professor of finance at the SP Jain Institute of Management & Research in Mumbai. “There are a lot of good people under him, but frankly they’re all overshadowed by Uday. Anyone who has to put themselves in Uday’s shoes has a difficult job because they are an institution on their own.

For now, Kotak is still in charge. The company is considering a takeover of small rival IndusInd Bank Ltd., people familiar with the matter said in October, a move that would solidify Kotak Mahindra Bank’s position as one of India’s leading private lenders and increase its assets of more than 80%.

Looking back, Mahindra says her decision in the 1980s to bet on Kotak was rewarding.

“I vividly remember my father and my uncle asking me at the time why I trusted this young man just out of business school,” he said. “I told them I had a hunch that one day we would be very happy to have our name associated with his. I just had a strong feeling about its potential.

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