
Kotak Mahindra Bank, one of India’s leading private lenders, has revealed its plans to accelerate the opening of new branches in the upcoming financial year 2024-25. Despite facing restrictions on sourcing new customers digitally, the bank aims to add approximately 175 to 200 branches during this period. This move comes after the Reserve Bank of India (RBI) prohibited Kotak from onboarding new customers through online and mobile banking channels, as well as issuing new credit cards, due to information technology-related deficiencies.
Branch Expansion Strategy
According to Virat Diwanji, the group president and head of consumer bank at Kotak Mahindra Bank, the institution has consistently been adding around 150 branches annually. Diwanji stated in an email interview with Reuters that this momentum will continue in the coming year. The bank plans to focus on areas with readily available deposits to attract new customers through its branch network.
Transition from Digital Channels
Prior to the RBI’s order, Kotak heavily relied on digital channels for customer acquisition. In fact, a significant majority of its new personal loans (95% by volume) and new credit card issuances (99%) in the October-December quarter were processed digitally. However, the bank’s reliance on digital channels will likely shift in the medium-to-long term as it expands its physical presence and reach through branch expansion.
Potential Challenges and Benefits
Kranthi Baithini, the director of equity strategy at WealthMills Securities, noted that while Kotak’s branch expansion plans may not immediately result in acquiring new customers, the strategy could prove beneficial in the future. Increasing the bank’s presence and reach through branches is expected to have a positive impact in the medium-to-long term. However, Baithini also mentioned that this expansion strategy may come with higher overhead costs.
Compliance and IT System Strengthening
Kotak Mahindra Bank is diligently working to meet the RBI’s requirements and return to normal business operations. Virat Diwanji emphasized the bank’s commitment to fortify its IT systems, including enhancing digital payment security controls and complying with regulatory data cybersecurity standards. The bank has also made significant investments in hiring over 530 employees, primarily with technology backgrounds, within the past 12-15 months.
Focus on Personal and Business Loans
Despite the challenges faced, Kotak Mahindra Bank remains steadfast in its focus on personal loans and business loans. Virat Diwanji confirmed that the bank will continue to prioritize and expand these lending segments.