Kotak Mahindra Bank's 40-year journey & the road forward from here, in the words of Uday Kotak & Ashok Vaswani

Kotak Mahindra Bank is entering its 40th year at a moment when the financial sector is shifting quickly. Two years after stepping down as CEO, Uday Kotak says he remains committed to strengthening the institution that carries his name. As a board member and large shareholder, he describes his role as ensuring the bank adapts to a changing industry.

Alongside him, MD and CEO Ashok Vaswani sees technology as the defining force that will guide the bank’s next phase.

In a joint conversation with The Times of India, both leaders laid out their reading of the sector, the future of deposits, the rise of digital banking and the internal culture they believe will help the bank endure.


Kotak addressed the recurring rumours about potential acquisitions, including speculation around IDBI Bank. He said he was “blissfully unaware” of any such developments but emphasised that the broader sector has undergone a structural shift.

Customers have become more fluid with their money, moving quickly between savings accounts, mutual funds, equities and other products. Traditional advantages protected by regulation, he told ToI's Mayur Shetty, are weakening as money shifts from low-yield deposits to higher-return alternatives.

This shift is visible in the data. Mutual fund assets under management, which were around 15% of bank deposits in FY20, now stand near 35%. Over the next five years, Kotak expects this to rise to roughly 70%, even with deposits continuing to grow. The pressure on banks is clear: operating costs remain about 2.5%, compared with 10 basis points for liquid funds and 50–75 basis points for equity funds.

As savers turn into investors, the industry must adjust to serving customers across a range of products rather than defending old silos, he said.

Vaswani responded to concerns that such trends might weaken the banking model. He said Kotak’s strength lies in its diversified structure. The bank owns all 19 of its subsidiaries, allowing value created in mutual funds, insurance, capital markets and lending to stay within the group. He described the strategy as building targeted product suites for each customer segment, from affluent clients to mass retail, SMEs and institutions.

The deposit landscape, he said, is increasingly shaped by pricing. Affluent customers keep larger balances but tend to move surplus funds into investment products. Core India customers contribute granular, low-cost deposits in smaller amounts but in large numbers. Kotak also benefits from low-cost flows in areas such as custody and new offerings like “active money”, which offers fixed-deposit-like returns with the liquidity of a savings account. The task, he added, is to constantly capture these flows, even if they remain short-term.

On the question of branch expansion, Vaswani said the bank’s footprint is deliberate. Roughly 70–75 cities account for three-fourths of India’s deposits, and servicing them requires about 3,500 branches. Branches signal presence but are “essentially billboards”. He cautioned against expanding beyond need, as many global banks have done, only to spend years reversing those decisions. For him, a branch count between 3,400 and 3,700 is appropriate.

He also argued that digital banking should be robust enough to eliminate the need for customers to visit branches unless absolutely necessary. A digital process, he said, operates without fatigue, applies rules consistently and runs round the clock—features a physical branch cannot match.

Kotak pointed to the global rise of digital-only players like Brazil’s Nubank, valued at about $80 billion, and the UK’s Revolut. In India, platforms like Groww, which did not exist before 2017, now account for roughly a third of new mutual fund SIPs. To him, the direction of banking is “unmistakably digital”.

On fees, Vaswani said the key is designing flexible models. Minimum balance requirements function as a form of pricing, but customers can also opt to pay only for services they use. Affluent customers often consume more services, while core India customers prefer small, transparent charges. The bank, he said, offers both structures.

Kotak, reflecting on foreign partnerships, said he has always welcomed overseas investors but believes guardrails are essential. Early partnerships with Goldman Sachs, Ford Credit and Old Mutual allowed the group to build capability before buying back stakes.

He noted the recent shift toward higher domestic ownership in Indian banks as mutual funds and insurers increase their holdings while foreign stakes decline. This reflects a deeper change in which Indian savers are becoming investors, a trend he sees as positive but requiring careful stewardship.

On governance, Kotak outlined four pillars: management, the board, the regulator and shareholders. Each plays a distinct role, and in a leveraged institution like a bank, oversight must be active and alert. Vaswani added that culture is central. An organisation’s culture, he said, is defined by what it rewards and what it penalises. Reinforcing transparency and honesty is essential for long-term strength.

Kotak also addressed the long tenure of several senior leaders. He said it was not planned but grew organically, shaped by a group of middle-class professionals who joined in the late 1980s and 1990s and built the institution together. The blend of long-serving managers and new talent in areas like technology and marketing now ensures continuity alongside renewal.

On risk and capital, Kotak defended the bank’s approach. Capital discipline, he said, stems from its origins as a small startup funded by Rs 30 lakh of personal and family borrowings. Early decisions involved taking measured risks, such as car finance ventures and backing public issues with limited balance sheet strength. During the 1997 NBFC collapse, the bank reduced its loan book by half and survived while most peers failed. What seems like excess capital today, he said, is the result of strong cash generation and early bets that paid off, such as the 2014 purchase of MCX for Rs 459 crore, now valued at around Rs 7,500 crore.

As hiring patterns change with credit decisions moving to platforms, Vaswani said the bank now looks for people who can adapt, learn and stay focused on customers. Chartered accountants helped build the bank, he said, but engineers will take it forward. The aim is to strengthen the platforms so that employees stay because they prefer working with better systems.

Kotak briefly commented on interest rates, saying the fall in wholesale inflation is partly due to GST cuts. He sees a possibility of a 25-basis-point rate reduction either in December or February.

Vaswani said rate cuts affect the bank more acutely. Q1 was weak due to high MFI credit costs, late rate cuts and timing effects on margins. Pressures are expected to ease from Q2, and margins could strengthen in Q3 and Q4 if there are no further cuts and deposit repricing stabilises.