Facing a ban on the digital onboarding of customers, private lender Kotak Mahindra Bank is pivoting its growth strategy and once again focusing on the expansion of its physical network.
The private lender that had opened less than 350 branches in the last four years aims to open 200 branches this fiscal and has unveiled a new distribution structure that brings together the physical branch network, digital branch channels (mobile and net banking) and the voice channel.
“The new distribution structure underscores our dedication to embedding banking services seamlessly into our customer journeys, ensuring convenience and reliability at every touchpoint,” said Ashok Vaswani, chief executive of Kotak Mahindra Bank. “We are excited about this strategic move and confident that it will further strengthen our ability to deliver exceptional value to our customers.”
The lender is also ramping up its branch opening strategy, a move industry insiders said will blunt the likely business impact of the Reserve Bank of India decision in April, banning the bank from issuing fresh credit cards and onboarding new customers through online and mobile banking channels.
The bank has been so far heavily reliant on its digital channels to source business. About 95% of its new personal loans by volume were disbursed digitally in the October-December quarter, while it issued 99% of new credit cards through digital channels, data collated by Citi showed.
Likewise, 90% of the new investments and 76% of the fixed deposits and recurring deposits were sourced digitally.
In a note issued shortly after the RBI ban, Macquarie Capital raised concerns over the slow growth in branch expansion. “The fact that Kotak has seemed reluctant in opening branches, with fewer than 350 opened in the last four years, is an issue,” Suresh Ganapathy, head of financial services research at Macquarie Capital, said in the note.
Some analysts expect Kotak to report slow loan growth in the quarter ended June. The bank is slated to report its quarterly earnings on July 20.
“For KMB, we think markets are a tad too optimistic on loan growth, ignoring the possibility of reduced aggression,” said Santanu Chakrabarti, banking analyst at BNP Paribas Securities.
A section of analysts, though, said its fortunes could revive soon.
“Looking ahead to FY25, there are indications of a revival, particularly evident in (Kotak’s) robust deposit growth, which is expected to bolster business expansion, given the comfortable capital-to-deposit ratio level at 84%,” said Ajit Kumar Kabi, banking analyst at LKP Securities. “We anticipate that margins will remain steady in the near term, supported by favourable credit costs.”
