Kotak Mahindra Bank Plans Expansion Despite Digital Restrictions

Kotak Mahindra Bank aims to increase its pace of branch openings, planning to add approximately 175 to 200 new branches in the financial year 2024-25.

This move comes after the Reserve Bank of India (RBI) barred the bank from acquiring new customers through digital channels due to IT-related deficiencies.

RBI Restrictions on Kotak Mahindra Bank:

In April, the RBI restricted Kotak from onboarding new customers via online and mobile banking and issuing new credit cards. These measures were enforced due to identified issues in the bank’s information technology infrastructure.

Virat Diwanji, Group President and Head of Consumer Bank at Kotak Mahindra Bank stated that the bank has consistently added around 150 branches annually and plans to maintain this momentum.

The new branches will target areas with easy deposit availability, enhancing customer acquisition through physical branches, which is gaining traction.

Shift from Digital Reliance on Kotak Mahindra Bank:

Before the RBI’s directive, Kotak Mahindra Bank relied heavily on digital channels for customer acquisition. In the October-December quarter, 95% of new personal loans and 99% of new credit cards were issued digitally. The data for the January-March quarter is not yet available.

The new branch openings may not yield immediate customer acquisition results but are expected to enhance the bank’s presence and reach in the medium to long term.

However, as noted by Kranthi Baithini, Director of Equity Strategy at WealthMills Securities, this strategy will incur high overhead costs.

Strengthening IT Systems:

In response to the RBI’s restrictions, on the Bank is diligently working to meet regulatory requirements and return to regular operations. The bank has significantly invested in fortifying its IT systems, focusing on digital payment security and cybersecurity standards.

Kotak has hired over 530 employees in the past 12-15 months, primarily from tech backgrounds, to bolster its IT capabilities. Despite the challenges, the bank remains focused on expanding its personal and business loan portfolios, continuing its commitment to growth and customer service.

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