Kotak Mahindra Bank Says Uday Kotak's Appointment As Non-Executive Director In Accordance With Law; Not Averse To Large Acquisitions

Kotak Mahindra Bank on Saturday said the decision to appoint promoter Uday Kotak as a non-executive director is in accordance with law. 

On a specific question on its interest in IDBI Bank, Kotak Mahindra Bank MD and CEO said the bank is “not afraid” of undertaking a big acquisition and it will assess any proposal based on the value it brings from a customer profile perspective.  

Faced with a regulatory mandate restricting a managing director and chief executive's term to 15 years, the Kotak Mahindra Bank board had earlier this year decided to appoint Uday Kotak as the non-executive director after his current term ends in December. 

Since the announcement of Uday Kotak as a non-executive director on the board, some concerns were raised about whether this will get the regulatory nod because, in its April 2021 circular, the RBI also makes it clear that there should be a three-year cool-off period before an MD and CEO is reappointed. 

“What we have come to is something that we really believe is in accordance with law and regulations. And we do believe that it is in the best interest of all the stakeholders,” its chief financial officer Jaimin Bhat told reporters here. 

He parried a follow-up question on whether it has received any communication from the Reserve Bank in this regard. 

Meanwhile, on its keenness to grow through acquisitions, Kotak said the bank has high capital adequacy and always chased deals where it sees value. 

Kotak Mahindra Bank continues to “stay hungry”, Kotak said, adding that it is open to small acquisitions and not afraid of big acquisitions either. 

To a specific question on its interest in the LIC-run IDBI Bank, which is on the block, Kotak declined to comment directly but said that the “template” it works with, is clear.

KMB will evaluate the value of the customer base in an acquisition target, along with the bank's culture and also the ease with which it will be able to integrate staff, Kotak said. 

The bank, which acquired ING Vysya Bank in 2014 in what continues to be the largest merger in Indian banking to date, had acquired Microlender BSS in 2017 for a consideration of Rs 150 crore, Kotak said, adding that the company delivered a post-tax net of Rs 297 crore in FY23. 

Similarly, it also acquired Sonata, an Uttar Pradesh-focused Microlender, in February this year, Kotak said. 

Kotak said he hopes for certain values which are core to the lender, like working as a family, will continue even after December, when he will be relinquishing the chief executive's chair. 

Meanwhile, Kotak also said that while Indian banks have been untouched by the crisis in the West, there is a need to prioritise financial stability over other aspects so that shareholders' and depositors' trust isn't eroded. 

A bank needs to build a fortress of resilience around it in order to ensure that it is untouched by any of the external volatilities, Kotak said. 

Naming storeyed institutions like J P Morgan, Kotak said KMB is committed to ensuring longevity and following sustainable business models which will keep it continuing for the long term.