Kotak Mahindra Bank CEO Says Not All Estimates Of RBI Business Restrictions' Impact Worked

Impact of the Reserve Bank of India's ban on Kotak Mahindra Bank Ltd.'s financials has been in line with its initial estimate, but not every assumption has worked out as the bank had thought, Chief Executive Officer Ashok Vaswani said.

"Obviously, every single assumption did not work out exactly as we thought," Vaswani said, answering a query in a post-earnings call. "Some things have worked out better and some things have been worse, but good news is that the total impact of the embargo is still in line with what we had initially estimated at about Rs 450 crore annually."

In April 2024, the RBI had placed severe business restrictions on the bank because of serious lapses in its information technology system. This included its IT inventory management, patch and change management, user access management, vendor risk management, data security and data leak prevention strategy, business continuity and disaster recovery rigour and drill. The lender was found to be deficient in these areas for over two years.

The regulator barred Kotak Mahindra Bank from onboarding any new customers through digital means and stopped the addition of new credit-card customers. These restrictions continue to remain in place.

The management made a whole bunch of assumptions on how portfolios will be made, how much the bank will have to spend, acquisition and marketing costs, which was a pretty complex set of variables that they were trying to manage, Vaswani said.

"At that time, Dewang and I both felt that it was important to give assurance to the market that this is the kind of number in or around the impact of the embargo. That's how we came with that number of Rs 450 crore," he said.

While he declined to give an indication as to when the RBI embargo could be lifted, Vaswani said that the bank has made significant progress on the IT front, has been addressing the RBI's concerns and vastly improving customer service.

He also said that the bank is in regular touch with the RBI, keeping them updated on the developments.

He said that the bank has used this time well to do a bunch of improvements on the technology side. It has sharply defined the group's 'go to market technology' strategy, launched the new Kotak 811 application and has been digitizing and automating customer journeys.