Fourth largest Private Lender, Kotak Mahindra Bank has seen its technology spending rise beyond its usual 10-12 per cent allocation of total expenses as it tackles the challenges posed by the Reserve Bank of India’s (RBI) embargo on its credit card business, the bank stated during the press conference of its Q3 FY25 earnings.
The restrictions, which were implemented due to technological deficiencies, have had a Rs 450-crore annual impact on the bank.
Devang Gheewalla, CFO, Kotak Mahindra Bank, explained the shift, “Before the embargo, we had a 30-month plan for upgrading our technology. While we typically allocate 10-12 per cent of our total expenses towards tech spending, the embargo forced us to reprioritise and prepone some investments.”
On April 24, 2024, just months after Vaswani assumed leadership as the bank’s chief, central bank imposed restrictions on Kotak Mahindra Bank, preventing it from onboarding new customers via its online and mobile banking platforms and from issuing new credit cards.
Additionally, Milind Nagnur, the Chief Technology Officer and Chief Operating Officer (CTO & COO) of Kotak Mahindra Bank stepped down from his position stating personal reasons earlier in January 2025.
Addressing the RBI’s Concerns
Kotak Mahindra Bank’s Managing Director and CEO, Ashok Vaswani, said that the bank has systematically worked through RBI’s directives, “At the core of this effort is building a much higher level of resiliency in our technology platform. We’re improving cybersecurity, IT risk management, capacity planning, and customer experience. Additionally, we’ve launched new apps, including an updated mobile banking app, the 811 app, and Cherry, our investment app.”
The RBI’s restrictions pushed the bank to reassess its operational assumptions. “When the embargo hit, we made several assumptions on portfolio behavior, acquisition costs, and marketing. Some of these assumptions worked better than expected, while others didn’t. However, the total annual impact remains in line with our estimate of Rs 450 crore,” Vaswani stated.
The embargo has impacted Kotak Mahindra’s unsecured retail lending growth. “The credit card book has plateaued, and the microfinance portfolio is still stabilising,” Vaswani acknowledged. Meanwhile, the bank has shifted focus to secured lending, such as SME loans, mortgages, and working capital loans.
Shanti Ekambaram, Deputy Managing Director, Kotak Mahindra Bank highlighted, “We have not grown our unsecured book for nine months due to the embargo, but our growth in secured assets, including SME and corporate loans, has been robust and stable.”
Vaswani also confirmed that the acquisition of Standard Chartered Bank’s personal loan portfolio, valued at Rs 3,000 crore, is on track for completion. This will accelerate the bank’s secured asset growth, even as it awaits regulatory clearance to resume its credit card business.
Vaswani emphasised that the lessons learned during this period have strengthened the bank’s operations, “We’ve implemented significant changes in our microfinance business and are now better positioned to manage risks. Once we emerge from the embargo, we’ll accelerate growth in our credit card and unsecured lending segments.”
Vaswani added, “We’re making good progress and are in constant consultation with the regulator but there’s no specific timeline on lifting of the embargo.”
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