MUMBAI: Kotak Mahindra Bank, hit hard by a regulatory bombshell late last month, on Saturday admitted that the ban on its online and mobile app customer onboarding will impact its business marginally but that’s “a lesser worry as the bigger worry is the reputational damage” arising from the punitive action and that “their first priority is to get the IT infra right to the level it’s the gold standard.”
The Kotak Bank management, led by the new chief executive Ashok Vaswani who joined only in January and the joint managing director Shanti Ekambaram, admitted that the RBI action will impact business to some extent especially the 811 banking channel as over 90 percent of personal loans and small business loans have been done online.
But despite repeated questions, they did not quantify the loss likely to be seen, insisting that “the more serious issue is the reputational damage and not financial as we are free to do our business through our branches, wherein now our focus will be more cross-selling than it used to be before the ban.”
They were addressing the media for the first time after the April 24 punitive action by the Reserve Bank wherein it had ordered the bank to immediately stop on-boarding customers through online channels and mobile app and also issuing new credit cards for its failure to improve its risk management systems and IT infra for the past two years. Announcing the March quarter and FY24 full year earnings, the bank said its standalone net income for the quarter rose 18 percent to Rs 4,133 crore and for the full year to Rs 13,782 crore.
On a consolidated business, the net income jumped 17 percent to Rs 5,337 crore and 22 percent to Rs 18,213 crore for the full year.
During the year under review, the fourth largest private sector lender added as much as 94 lakh people to its customer base of which 24 lakh were in the March quarter alone, taking the overall base to 4.1 crore.
“Let me make it very clear that absolutely there is no impact whatsoever on our existing customers. As a company and me personally, we are totally committed to build a solid technology infrastructure to a gold standard,” Vaswani said.
“Over the years, we have been increasing our IT spends and in FY24 this touched 10 percent of our operational expenses, which rose 20 percent to Rs 16,679 crore, which means we almost invested Rs 1,700 crore into IT. But let me admit that this has not been enough as both demand and supply didn’t match and that our resilience and risk management systems could not stand up to the demand side and our efforts have fallen short of the regulatory expectations,” he added.
When asked when does he expect to get back to normalcy, he said, “We want to do that as fast as possible. But that does not mean it is tomorrow. It's going to take at least a couple of months.”
Group chief financial officer Devang Gheewala said the key net interest income increased 13 percent to Rs 6,909 crore for the quarter on a net interest margin of 5.28 percent which was down from 5.78 percent in the year ago quarter which he described as the best-ever for the bank and the industry.
Fees and services income increased 28 percent to Rs 2,467 crore.
Operating costs jumped 20 percent to Rs 16,679 crore in FY24 from Rs 13,787 crore in FY23 and of this as technology expenses were 10 percent of total operating cost in FY24. From an annualised basis, this rose 40 bps on-year, and both Vaswani and Gheewala said this year they will reprioritse the IT spends and would broadly remain in the current level in terms of percentages.
Advances increased 20 percent to Rs 391,729 crore from Rs 325,543 crore in March 2023. Of this customer assets, and credit substitutes rose 20 percent to Rs 423,324 crore from Rs 352,652 crore in March 2023.
Unsecured retail advances, including retail micro finance, rose to 11.8 percent from 10 percent in March 2023.
Asset quality improved overall with gross NPAs falling to 1.39 percent from 1.78 percent and net NPA to 0.34 percent from 0.37 percent.
