Resolving the embargo imposed by the Reserve Bank of India (RBI) on onboarding new customers is his topmost priority, Ashok Vaswani, MD & CEO, Kotak Mahindra Bank said in his first media interaction with Moneycontrol after assuming the the corner office in January this year.
This is because getting the digital banking channel and technology-related aspects right is fundamental for the bank. “For me, technology is fundamental; it's a matter of survival. That's the only way you will get more customers, The fact that the RBI was worried about it means that we will worry about it a lot more. This (the RBI ban) is baptism by fire in some way. It is definitely providing an impetus. We have to get this done and never let a crisis go wasted,” he affirmed.
On April 24, within months of Vaswani taking charge as the bank’s chief, the RBI barred Kotak Mahindra Bank from onboarding new customers through its online and mobile banking channels and issuing fresh credit cards. While credit cards accounted for about 4 percent of the bank’s loan book when the ban was imposed, the bank’s digital app accounted for 79 percent of new business loans disbursed by value and 95 – 99 percent of new personal loans and new credit cards sold by volume.
When asked if he was taken by surprised by the regulatory action, Vaswani said the bank was already working on this issue. “Even before me, (Uday) Kotak realized that we have to do a lot of work on technology, and they started the work on technology. I knew that the technology was a concern and they (the regulator) were worried about it,” he said candidly. For Vaswani, digital capabilities will be the key customer acquisition engine. “We’ve got 1984 branches. If I don't want to compete with my peers on the branch distribution front, the only way to compete is on the technology front,” he explained.
Vaswani refrained from making any forward-looking statements, when nudged for guidance on a timeline for the ban to be lifted.
“We have had very regular meetings with them (RBI officials). We’ve said that there are no compromises on this kind of stuff. I want to build something sustainable, because it's critical to the whole business strategy. It is not about just satisfying the RBI, but also about building a backbone that can take the bank to the next level,” he explained, while adding that some of the key technology partners such as Infosys, Oracle, Accenture, and Cisco are working with the bank in resolving the regulatory logjam. “I've provided whatever resources our technology team needs to make the difference”.
In the process of improving its digital offerings, the bank has developed an upgraded Kotak 811 app and a new mobile banking app which is in the beta testing stage. “But that's not where the issue is,” said Vaswani while pointing out the larger issues for Kotak’s digital backend. “The issue is the load that is falling on the platform and how do we solve it?”
“The custom core banking system, which we use, is now being tested for 100-time volume. That's not going to work. How do you rethink this strategically, as opposed to putting band-aid is the fundamental question,” he said adding that capabilities such as UPI or unified payments interface have taken off in a big way in India such that traditional payment players such as Visa, MasterCard and the rest have become quite irrelevant as far as India is concerned. However, Vaswani points out, the problem is in the way banks are building the backend capabilities. “Banks have taken pieces of technology and totally vendorised it. It's a vendor for everything. We need to do it on proprietary and build a series of adapters,” he said.
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