Kotak Mahindra Bank founder Uday Kotak has said that the bank was a bootstrapped start-up back in 1985 which began operations with a modest sum of Rs 30 lakh. In an exclusive interview with Business Today magazine, the ace banker traced his financial institution’s humble origin, which was largely driven by an entrepreneurial spirit.
In the early years, most employees at the bank had middle class background, and the value system kept them together, according to Kotak.
“A lot of Kotak-ites started with strong middle class values and that really kept us all together. We didn't start as highflying. Kotak [in] 1985 was a start-up in today's world. And we started in a bootstrap manner,” he said.
“Raised a little bit of capital, a total of Rs 30 lakh. Therefore the whole concept of entrepreneurship was at the core of who we are. We combined that with the need for professionalism and we actually coined the phrase ‘professional entrepreneur’. That is something which we deeply believe in and that is seeped into the culture,” he said.
Influenced by his upbringing, Kotak sees the company as a family.
“I genuinely feel a company is like a joint family. When I was born, I was born in a home with 63 family members and one kitchen. So, the concept of living with family, cousins, uncles, aunts, how do you make sure that you live together at the same time you pursue your own goals and interests,” Kotak said.
However, the banker believes that eventually the institution has to mean more than an individual.
“I have always believed an institution is more important than an individual, and institutions must go on forever. Individuals may come and go. That is a core philosophy I deeply believe in, and that's what we are really working on.”
He cited global banks that operate with family names but have moved beyond the persons who started them.
“If you go back to the history of successful financial institutions, whether it's a JP Morgan or a Goldman Sachs or Morgan Stanley or a Merrill Lynch, which is now of course part of Bank of America, all these were family names started by individuals and families. Most of the individuals are gone but the institutions have remained.”
“When you're putting your name on the line you're saying ‘I'm ready to commit my reputation to this institution’. That's what we did on day one. Now, of course, the brand Kotak belongs to the institution, and it is extremely important for the board and the management to nurture and protect the brand and reputation over everything else.”
From overcoming the 1991-92 financial crisis to the metamorphosis from an NBFC to a bank, Kotak highlighted the major turning points in the financial institution’s history.
“I call turning points as agni parikshas (trial by fire). Starting a business was relatively the easy part. The important turning points in the journey from say 1985 to 2023, which is roughly 38 years, were 1992 when you saw a significant challenge to India's financial sector. You saw the famous securities scandal and we survived that. We lived through that and came out completely unscathed. You then saw the significant Asian crisis and the NBFC crisis which happened between 1997-98 all the way up to 2002-2003.”
“At that stage we were a non-bank financial company. There were more than 4,000 NBFCs, and barely I think around 20 survived. You then then came to the conclusion that if you did the right thing, which was within the law of the land, it always worked for you. And there was enough ability to be creative and at the same time within the framework. That's something which worked for us. Then of course we applied for a banking license which we got in 2003, which was another important moment in our journey. Thereafter in 2014-15, we actually acquired in ING Vysya Bank in an acquisition and a merger, where ING, a global bank had a 44% stake and we folded that in into Kotak.”
He cited other key instances too. “Along the way, I think there are many many areas which were big learnings for us. Our joint venture partnership with Goldman Sachs, with Ford Credit, with Old Mutual in the life insurance business. I'm a great believer that it is important for Indian companies to learn and implement and really thereafter execute well. Of course the major transformation from here on is how will customer centricity, risk management and technology play together,” he said.
Earlier this month, Kotak received the Business Today Best Banks Lifetime Achievement Award in recognition of his outstanding contribution to the banking sector spanning over three decades. In acknowledgment of the award, Kotak touched on the economic backdrop when he started his career and thanked India’s policy makers for financial reforms.
“I am a product of India's financial sector reform. And at a point of time when I started my career, we were just beginning to see the first signs of potential reform. We were still in a closed economy, a controlled economy in the early to mid 80s. It was a great time to find areas and spots which could really be transformed over a period of time.”
“I was fortunate to find many of those examples in a very very imperfect financial market. And credit to India, its practitioners, its policy makers, its reformers across the last 30-35 to 40 years, that we have seen such a significant change in the landscape of India,” he said.