‘Does Not Feel Good’: Kotak Mahindra CEO Expects Bank to ‘Come Out OK’ After RBI Torpedo
Kotak is already working with the RBI to appoint an external auditor for IT systems and the process should be completed soon, said Ashok Vaswani.
Kotak is already working with the RBI to appoint an external auditor for IT systems and the process should be completed soon, said Ashok Vaswani.
The RBI directive on Kotak Mahindra Bank has impacted the lender’s franchise and reputation even though its financial impact is expected to be minimal, CEO Ashok Vaswani said at a presser on Saturday. RBI had asked Kotak to stop adding clients digitally and issuing credit cards due to gaps in its IT infrastructure.
“The Reserve Bank of India order, obviously, has had an impact both on our franchise (and) our reputation, which does not feel good,” Vaswani said. “…we are committed to coming back strongly; that’s our number one priority.”
The bank will double its efforts, resources and money in addressing IT-related issues, Vaswani said, adding that the bank currently spends 10% of total expenditure on IT.
Kotak is already working with the RBI to appoint an external auditor for IT systems and the process should be completed soon, he said.
After the RBI order and the resignation of joint managing director KVS Manian this week, analysts had expressed concerns that Kotak’s heavily digital business model meant the ban would hurt its medium-term growth, leading to a 16% drop in its share price over the past six trading sessions.
Vaswani, who comes with a background in technology, said the spending was around Rs 1,700 crore in FY24 against about Rs 1,300 crore in the year-ago period, and added that they will increase it at a similar rate. Over the past two years, the overall spending on the tech front has gone up, Vaswani said, adding that the efforts, which include new senior-level hires in tech functions, and augmenting the overall team, have “clearly fallen short”.
The bank will be hiring an external auditor to assess the overall technology architecture soon, as mandated by the RBI, he said.
There will also be a reprioritisation of the expenses to be undertaken and also advancing of the targets on attaining certain benchmarks being pursued, he said.
When asked to quantify the cost of such a strong action, he declined to quantify saying it is a complex situation. The bank will try to make from the existing customers, which will entail a market share gain, but will lose out because it is deprived of growing the business, Vaswani said, adding that he expects to “come out ok” on a net basis.
The tech aspect will take a lot of time and mindshare of the top management going forward, and the bank wants to come out of the embargo in a “roaring” way, he said.
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