Kotak Mahindra Bank's CEO Ashok Vaswani's vision: Uniting Kotak under one narrative, strategy, and umbrella

Q: How has the past year been?

A: I got back to India after 35 years, and I always joke that it took all those years of training for this job, but here I am. And this one year has been quite incredible. The India I left and the India I’ve come back [to are] obviously very, very, very different… But Kotak is an incredible story. It’s a great brand. Kotak manufactures every single financial services product there is. And getting those products and services to our customers is a unique opportunity. And I think Kotak has done exceptionally well in the past, and I think it’s poised to do great things [in the times] to come.

Q: You took over at a time when India’s banking space had gone through many changes. How would you describe it today?

A: I think Indian banking has come a long, long way. The Reserve Bank of India has done quite a remarkable job of opening up the banking industry, opening up financial services... When I left India in 1987, it was at an extremely nascent stage… [then] being able to get a car loan in like four to five days was considered a very, very big thing. But things have changed dramatically, and I think the RBI has guided this process along remarkably well and I am sure there will be further changes... The good news is that India has opened up on its own terms and will continue to do so.

Q: From an industry perspective, how would you describe the unsecured credit stress?

A: When Covid-19 hit, nobody knew how it would play out and when there is such a high degree of uncertainty, people pull back, and every other bank pulled back. And then the governments injected tremendous amounts of liquidity into the system and banks realised that this is not going to be such a problem from a lending perspective and waded back in aggressively. They went to the kind of customers who technically are the safest—the salaried kind—and aggressively gave them lending lines. There was bunch of salaried customers who got over-leveraged and there is a certain amount of that in the system that will play out. I think RBI caught it pretty early. I remember my first analyst call [where] I called it out saying, ‘I am a little worried about this’, and RBI called it out a little after that, more broadly. The regulator moved very quickly, and unsecured retail growth has slowed quite dramatically over the last two-three quarters.

Q: What will happen in the coming quarters?

A: Unsecured retail credit plays through the system. It usually builds up for two or three quarters and then tapers out over the next two or three quarters. My sense is that we are at the peak. At least at Kotak I think we are at the peak and then it will taper off and we will come back to some level of normalcy two quarters down the road.

Q: Kotak is a full-service bank. Are you comfortable with its performance?

A: I would say that this year has been kind of rocky. I do not think it is news that we got an embargo from the RBI [on onboarding new customers through online and mobile banking channels and issuing fresh credit cards]. And that has taken up a lot of my personal and the management’s bandwidth.

Q: That is a subject that you know from your previous outings as well...

A: Yes, sometimes I wish I didn’t. It has taken up a lot of our time. But what I feel good about is [that] we’ve taken this time to not only fix the technology issues and make sure that we get into much better shape, but have also taken the time to rethink and bring the whole of Kotak under one narrative, one strategy, one kind of umbrella, so that when we go out aggressively and land things—and I think you’ll see a lot of those landings happening in the next calendar year—you’ll start seeing those come through. All the preparatory work that has been done in the past six to nine months will start showing up in the marketplace then.

Q: What is the state of your tech stack?

A: Tremendous amounts of work had to be done [and] has been done. But remember that technology is the new arms race. It is moving so fast that there is no question of taking a breather. But on basic things like resilience and cybersecurity, I think we’ve done a tremendous amount of work.

Q: When 811 was launched, it set off expectations. I don’t think it delivered on that. Is there a new 811 that you have in mind?

A: I don’t know why you don’t think it delivered. I think 811 has been a fantastic business for us… 811 was acquiring, before the technology embargo, about 600,000 accounts every single month. And just the sheer scale of acquisition… to do it at scale is amazing. Now, I think the fundamental thing that I wanted to drive when I got here, is this notion of how do you put the customer at the centre of everything that you do. So, let us take 811… as you know it was being marketed as a product that is like a savings product, [with the] ability to make payments very, very efficiently, not have a minimum balance on the savings account, open in a digital account in less than 3 minutes and all of that.

Q: And many of those things were brilliant...

A: The team delivered on all of them. So, to my mind, 811 was a tremendous success. But if you really think about 811 as an offering for core India, which also has a need for insurance, protection, investment, borrowing… that completely changes the game. And now we have launched a new 811 app… and it stitches these journeys together. For the target customer—the core Indian customer—this is one place where you can get everything done smoothly, seamlessly and nicely. And from an economics point of view, it is great because you acquire a customer, and you can do much more with the customer rather than just one product. So, I am extremely excited about 811 and I cannot wait for us to get released from the embargo because then we will get back to those levels of acquisition with three or four product engines attached to the plane.

Q: Which of your products would you want to scale up rapidly?

A: The key focus for me is the customer. If I’ve learnt one thing in my 35 years, it is to get it right by the customer, [and] everything else will follow. Who is the customer that we are trying to go after and what is the proposition that I’m going to offer? So, where are we going to play, where are the areas of disproportionate attention? We have a fantastic top-rated private bank, [so] how do we get into affluent, NRI and core? We have got offerings against each one of those, it is about polishing those offerings, bringing all the products together to complement and make that offering strong, and then go after the customer.

Q: What do you think of India’s fintech industry?

The fintech sector is thriving in India. It is very encouraging to see how well they have done... some of them have grown and become serious companies of size and repute. The advantage fintech brings is a narrow focus and contemporary technology. The problem they have is how do you scale and how do you learn how to deal with the regulatory environment? We know what scale is. We know how to deal with the regulatory environment. We are obviously more broad-based. How do you bring that contemporary technology and kind of drive it? So, I think there is room for both. And there’s no reason why we can’t play that game. And there’s no reason why we can’t bring that technology to us, to our customers. I think it’s exhilarating.

Q: Uday Kotak said at one of our events that from a nation of savers, India is moving towards becoming a nation of investors. I want to link that to the deposit mobilisation challenge in the banking space. What is your view on this?

A: Uday was absolutely right. Just look at the money flowing into mutual funds through SIPs (systematic investment plans) every month… these are stunning numbers… `21,000 crore… `23,000 crore… `24,000 crore—those are of course gross numbers. There are break-offs as well at a very high rate. But still, a lot of money is flowing into that. The Indian consumer is financially savvier than the American or UK consumer.

Q: Why is that so?

A: It’s the mindset. The average American consumer or the average UK consumer is not that financially savvy. For Indians, it’s in our blood, it’s in our DNA. We are taught very early how important money is and how you should be savvy about money. That’s just the way we have all been brought up... And you can get away with a lot of other stuff in the UK or the US, which you would never be able to get away with in India. The Indian consumer would hold you to that. The Indian consumer is saying, ‘Look, I want a better return on my money. And mutual funds in the stock market are giving me that.’

Having said that, deposits are usually a function of economic activity. And as long as there are heightened levels of economic activity, deposit levels continue... even in a market like the US, where 61% of the people would have some kind of mutual fund compared to 6% here. If you take say checking accounts, which is what we call current accounts, as a percentage of GDP it has continued to be high. There will be a quarter when there will be some tightness, there will be some quarters when there will be less tightness, but generally speaking, deposits grow in line with GDP. That I think will continue.

Q: What is your view on the demand to incentivise fixed deposits? Do you buy into that suggestion?

A: What I buy into is a level playing field.

Q: Could you explain?

A: If you give a tax advantage to either mutual funds, debt mutual funds or equity mutual funds and not to time deposits, then you are not creating an even playing field. If there is a tax disadvantage, that is not a good place to be.

Q: What could our policymakers learn from global experience in this regard?

A: I think both in the UK and in the US, to the best of my knowledge, there is no tax differentiation between debt mutual funds and fixed deposits; both are treated on par. Of course, for capital gains, you get a better rate, which is true in India as well. I think in that context, there is a level playing field there, while that may not be the case here.

Q: Our banking system has gone through various cycles and while the health of the overall system has improved, do you see any emerging stress?

That is something that you have to be constantly vigilant about. Generally speaking, if you look at global events, every seven or eight years, there is something that affects [the system]. The good news is India for the most part has kept itself insulated from these global events. But then we have had our own share of crises.

So, you cannot put these things on autopilot and say everything is fine. They has to be constantly monitored, looked at, tweaked and see how things evolve over a period. You cannot get complacent about this.

Q: Is eternal vigilance the price we pay for a stable financial system?

Every industry gets the regulation that it deserves. I go back to the US; wherever there are some kind of extreme regulations [expected], the kind of mindset I try and put into my team is what is the regulator really trying to do; essentially, the regulator is saying get it right by the customer and shame on us if we need somebody externally to tell us that. We should be getting it right by the customer, and [if] we get it right by the customer, everything else falls into place. And so there will be times when things get heavy handed, some crisis will come, [and] we will react in a certain way. This is a constantly changing environment that you have to deal with.

Q: What will brand Kotak stand for in the future?

I believe that the big defining thing about India today is the aspiration people have… an ordinary person today has got aspirations that are far greater than they were 20-30 years ago. India is a land for aspirational Indians, and we want to be the go-to financial services organisation for aspirational Indians, fuelling their aspirations, partnering them with their aspirations, giving them the courage to go ahead with their aspirations. 

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