Over several decades, Uday Kotak grew Kotak Mahindra Bank Ltd. to become the wealthiest banker in Asia. He is facing one of the biggest tests of his career thus far, along with a decline in wealth, after India’s regulator unexpectedly banned his bank.
The lender’s stock fell as much as 13% on Thursday after it was prohibited from issuing new credit cards and from acquiring new clients via its digital channels. With a nearly 26% stake, the billionaire founder was the biggest shareholder and took the brunt of the selldown—the largest in four years.
Based on the Bloomberg Billionaires Index, he lost $1.3 billion in wealth as a result. As of April 24th, his net worth was $14.4 billion.
The market capitalization of rival Axis Bank Ltd. surpassed that of Kotak for the first time since September 2016. Following earnings that exceeded analyst estimates, Axis’s stock price spiked.
The Reserve Bank of India justified its prohibition by pointing to concerns about risk and governance regarding Kotak’s technological systems. According to a statement released late on Wednesday, it discovered flaws and non-compliance in a number of processes spanning two years, including vendor risk management, data security, and leak prevention techniques.
In response, Kotak stated that it has strengthened its IT systems through the “adoption of new technologies” and that it “will continue to work with RBI to swiftly resolve balance issues at the earliest.”
Kotak’s encounter with the regulator is not new. The billionaire previously sued the Indian central bank for the amount of his lender’s stake. In the end, the feud came to an end when Kotak consented to decrease his ownership in 2020.
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Fresh CEO
Kotak only gave Ashok Vaswani, the company’s new CEO, the reins at the beginning of this year. Scale, according to Vaswani, will be essential to the bank’s expansion, and the lender has been making technological investments.
Originating from the western state of Gujarat, Kotak established an investment company in 1985 using a loan of 3 million rupees ($41,000) from friends and family. The following year, he partnered with Mahindra.
The financier, who had served as Kotak Mahindra Bank’s CEO since its founding, increased his influence over the bank in 2006 when he severed ties with Goldman Sachs Group Inc. after more than ten years of collaboration.
According to Kotak’s most recent investor presentation for the quarter ended December 31, digital or non-branch methods accounted for nearly 98% of the transaction volume in the company’s savings accounts.
Ashutosh Mishra, a banking analyst at Ashika, stated that Kotak Mahindra Bank’s growth would be impacted by the ban on online customer acquisition because the bank is among the lenders that expand physical branches the slowest. “The RBI decision will damage the bank’s reputation.”
(This story was published from a syndicated feed; NDTV staff did not edit it, with the exception of the headline.)
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