Facing a RBI ban on tech related loopholes, the newly appointed chief of Kotak Mahindra Bank, Ashok Vaswani in his maiden annual letter to shareholders has said that technology will be at the centre of the lender’s efforts to transform and scale further. Addressing the RBI order Vaswani added that the bank had much more to do to leverage technology.
“It is evident that we have more to do… Changing customer expectations, the dramatic pace of business growth and the emerging risk landscape have meant that we have to move at a much faster pace,” Vaswani said. “We are absolutely committed to further enhancing our resources and commitments in this area and I am very confident that collectively, as a team – we will deliver and use this as an opportunity to leapfrog. It is also very clear that technology is going to be at the centre of our efforts to transform and hence, scale.”
In April this year, the banking regulator had directed Kotak Mahindra Bank to stop onboarding new customers through its online and mobile banking channels and banned it from issuing fresh credit cards.
The action was felt necessary by the regulator after the lender failed to plug gaps in its information technology (IT) systems. There were frequent outages in the bank’s core banking system and online channels in the last two years which inconvenienced the customers, the central bank had said.
Meanwhile the auditors of Kotak Mahindra Bank, Price Waterhouse LLP and KKC & Associates LLP also made specific statements on the bank’s IT infrastructure noting that the lender handles large volumes of transactions and the bank is highly dependent on such IT systems for the financial reporting process of the bank.
The auditor’s observed that it in-scoop IT system impacts financial reporting process because of the high level of automation, significant number of systems being used by the bank for processing financial transactions, and the complexity of the IT architecture. The observations are made within months of RBI restricting the bank from onboarding customers digitally due to lapses in IT infrastructure.
“The IT environment of the Bank is complex and involves many independent and interdependent IT systems used in the operations of the Bank for processing and recording a large volume of transactions,” the auditors of the bank observed. “As a result, there is a high degree of reliance and dependency on such IT systems for the financial reporting process of the Bank.”
Auditors have also identified certain key IT systems (in-scope IT systems) which have an impact on the financial reporting process, and the related control testing as a key audit matter because of the high level of automation.
These systems also gain importance as significant number of systems are being used by the Bank for processing financial transactions, and the complexity of the IT architecture.
Industry insiders say that RBIs actions on Kotak came after the eclipsing rise of customers in its 811 offering.
From 2021, Kotak811 operates as a ‘Semi-Autonomous’ Digital Bank within the Bank, with additional focus on service, user experience, engagement and cross-selling.
As of March 2024, Kotak811 had over 2.3 crore customers residing in more than 1,000 cities and towns across India. In FY 2023-24, the customer base grew by approximately 35% YoY, while deposits increased by 38% and overall throughput increased by 52% YoY.
In FY 2023-24, 72% of new Savings account were acquired by Kotak811 and over 50% of Credit Cards, Unsecured Loan, Insurance policies (non-life) and Recurring Deposits were cross sold to Kotak811 customers.
