“On average, most of our banks work on the operating cost to total asset ratio of 2-2.5 per cent, which means the operating cost between the saver and borrower is 2-2.5 per cent of assets. For global banks this is just 1 per cent or below,” Kotak said at a panel discussion at the Maharashtra investor summit here. 

“For banks at 2-2.5 per cent operating cost is a challenge. This is where we need efficiencies and ability to bring the cost down. Therefore, we need to look at aspects such as physical infrastructure, soft infrastructure and productivity among others. Or else, financial services players will migrate to Seattle…It need not remain in Mumbai or Singapore,” he added. Shikha Sharma, the head of larger private sector Axis Bank however sought disagree with Kotak saying though higher cost is a concern the way forward is not migrating out of the country but faster technology adoption. 

“The only we can get cost down is by going digital and leveraging the digital infrastructure,” Sharma said. She also said the underlying businesses of banks and other financial services say like mutual funds are completely different, as “a bank generates a primary asset whether it is lending to a small business or it lends to a micro-lending entity, while an MF is actually taking a secondary asset on its book.

While expressing optimism, she also noted that regulatory innovation is required to bring down cost. “We need to remember that the world has gone digital. Some of our regulatory infrastructure still requires us to have ledgers, physical records,” she said.

“I think they have to move on. How would you leverage digital infrastructure if you are required to keep physical records? That is the only time you will be able to extract the cost out,” she added. On whether if the international financial services centre at the GIFT City can be competitor to Mumbai, UTI MF chief Leo Puri said, “It is a well intentioned idea but fundamentally a flawed idea. It might do some good as hopefully we will have a successful real estate project in Gujarat but it will not be a successful financial centre.”