In a letter to shareholders, Uday Kotak, managing director of Kotak Mahindra Bank, shared his views on governance issues that have plagued India's banking industry and why risk management has become the most understated yet crucial banking function.The shock of recent losses incurred by banks looks unreal. This reality looks like it is a culmination of years of kicking the can.The big takeaway: Sound principles of corporate governance and harmonious functioning between government and regulators are the crucial elements for a sound future of banking. The silver lining amidst this chaos is the Insolvency and Bankruptcy Code (IBC) which is a game changer. It has changed the game from debtor in possession to creditor in possession in case of defaults. Underwriting is key. Errors of ‘Commission’ not ‘Omission’ destroy banks. Banks deal with other people’s money. The issue is directors and managers with no skin in the game are taking decisions on lending and writing off thousands of crores! Bankers need three human qualities – Prudence, Simplicity and Humility. Conduct is the key to our future. International factors – hardening oil prices and the expected increase in US Fed rates later this year, are putting pressure on our macro economy. India’s current account and fiscal deficit will both face challenges. The formalisation of the Indian economy in the financial sector will continue to gain momentum. In 2018, we are likely to see a tough macro and a better micro.On Kotak Mahindra Bank On course to achieve the customer base target of 16 million by September 2018 As of 31st March, 2018, we have crossed the 13 million mark (which includes our 811 customers as well). Kotak Securities commands 8.5% market share in the cash segment and our Group Assets Under Management (AUM) has grown by 29%.On the future Over the next five years, private sector banks will increase their industry share from 30% to 50%. Digital combined with Aadhaar is a massive game changer. I cannot over emphasise Aadhaar. India needs to grow at 9% per annum sustainably for the next 20 years to reach China’s current per capita income. We see an opportunity for us to sustainably grow in the financial services space at over 2X India’s nominal GDP growth.