Kotak Mahindra Bank to open more Physical Branches after RBI restriction

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Kotak Mahindra Bank, in light of regulatory restrictions on its online and mobile banking channels, is turning to physical branches to attract new customers. The bank plans to add up to 200 branches in FY25, a 20% increase compared to the number of branches added in 2023-24. In the previous financial year, the bank opened 168 branches. Additionally, Kotak Bank intends to increase the front-end staff at each branch, although the exact increase in headcount for the current financial year was not disclosed.

As of March 31, the bank had a total of 1,948 branches, with approximately 45% of them located in metropolitan areas. Kotak Bank aims to improve the productivity of its frontline branch staff through data analytics and by providing better quality leads to its ground team. The bank is also focused on enhancing the quality of new customers being acquired.

Virat Diwanji, Group President and Head of Consumer Banking at Kotak Mahindra Bank, acknowledged that it would not be possible to solely bridge the customer acquisition gap through digital means. Instead, the bank aims to make up the difference by driving higher numbers through its physical sales force at branches. This strategy involves targeting customers with higher potential value and deepening the relationship value of existing customers. Kotak Bank plans to leverage ‘One-Kotak’ for inter-group synergies and cross-selling opportunities.

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Regulatory Restrictions on Kotak Mahindra Bank

On April 24, the Reserve Bank of India (RBI) instructed Kotak Mahindra Bank to suspend onboarding new customers through its online and mobile banking channels, as well as issuing fresh credit cards. However, the bank is still allowed to provide services to existing customers. The RBI explained that it observed serious deficiencies and non-compliances related to various areas, including information technology inventory management, patch and change management, user access management, vendor risk management, data security, data leak prevention strategy, business continuity, and disaster recovery.

Diwanji emphasized that the RBI has clearly defined the requirements that need to be met in order to resume business as usual. The bank is fully committed to meeting these requirements and is working diligently to fulfill them as quickly as possible. Previously, Kotak Mahindra Bank announced plans to expand its technology workforce by hiring approximately 400 engineers in the current fiscal year.

Focus on Customer Engagement and Credit Cards

Currently, Kotak Mahindra Bank is the fifth-largest credit card issuer in the country, with 6 million outstanding credit cards as of April 30. Although the bank cannot issue fresh credit cards at the moment, it aims to enhance customer engagement through multiple propositions that offer value to customers. The bank’s focus is on travel cards for foreign currency, particularly amid the ongoing travel season.

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The restrictions on Kotak Mahindra Bank’s online and mobile banking channels have come at a time when many other banks are leveraging digital platforms to attract low-cost current account savings account (CASA) deposits. Kotak Bank’s CASA ratio fell to 45.5% as of March 31, compared to 52.8% a year ago. To improve this ratio, the bank is concentrating on increasing both the quantity and quality of customers acquired through physical channels. Additionally, Kotak Bank aims to enhance customer services and engagement to ensure that customers retain their money within the bank.

Diwanji mentioned that relationship managers are actively engaging with customers to encourage them to make Kotak Bank their primary account. This includes promoting services such as systematic investment plans (SIPs), utility bill payments, and EMI payments through Kotak Bank accounts.

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