How do you see the banking sector evolving over the next five years?
I think the financial service space in India is going through a catharsis — a very significant change in both scope and direction. Digital is redefining financial services in more ways than one. It’s much more about customer-centricity, customer convenience and deploying cutting-edge technology. We no longer have the luxury of a customer who sticks around for long, because he/she is much more demanding and much less tolerant. Secondly, for the first time, financial services are under massive attack from non-financial players. The dramatic change in technology and customer behaviour has stripped the financial players of their cocoon. Therefore, at Kotak Bank we have taken a very clear view that the future business model will be ‘phygital’ — which is physical plus digital. One does not need the density of physical presence as seen in the past. We don’t need 10,000 branches. We have about 1,500 branches right now, and would probably look at 2,000 in total, because that will complement our digital presence. There may be a time in the future, when a physical branch may or may not be required, but as of today, the customer would like to see some physical presence. So the ‘phygital’ model is very important for our plan for the future. It is in this context that we launched the 811 programme (which invites people to open a zero-balance, digital account), a massive shift from the physical to the digital world, which is giving us significant growth in our customer base. Obviously, we need to make the customer much more engaged and, over time, significantly profitable as well. This is our front-end investment, which is creating immediate cost pressure but building a very strong base for our future.
Is the current crisis in the financial sector any different from the past?
As I see, financial services experience an interesting 10-year cycle. You saw the sector go through the throes of risk in 1998, then in 2008, and now in 2018, which is now spilling over to 2019. So, the fragility of the sector from a risk management point of view keeps coming. And I believe the financial sector appears to be glamorous, but is fundamentally very fragile. In fact, it is the toughest of all businesses and with significant costs to society in case of a failure. Therefore, we are obsessed about managing risks and pr