Kotak Mahindra Bank is an Indian private sector bank headquartered in Mumbai. In February 2003, Reserve Bank of India issued the licence to Kotak Mahindra Finance Ltd , the group’s flagship company to carry on banking business. It offers a wide range of banking products and financial services for corporate and retail customers through variety of delivery channels and specialized subsidiaries in the areas of personal finance, investment banking , general insurance, life insurance, and wealth management. It is second largest Indian private sector bank by market capitalization . Kotak Mahindra bank has around 1400 branches and 2250 ATMs. Kotak Mahindra bank has around eight subsidiaries. Kotak securities is one of the largest broking housing in India with a wide geographical reach. Kotak securities operation includes stock broking and distribution of various financial products including private and secondary placement of debt, equity and mutual funds. Kotak general insurance provides service in the growing non-life insurance segment in India. Kotak general insurance caters to wide range of customer segments, offering an arry of non –life insurance products like motor, health , fire etc. Kotak investment banking is full –service investment bank in India offering wide suite of capital market and advisory solution to leading domestic and multinational corporations, banks , financial institution and government companies. Its services encompass equity & debt capital market, M&A advisory, private equity advisory, restructuring and recapitalization services, structured Finance services and infrastructure advisory & fund mobilization. Kotak International Business specializes in providing a range of services to overseas customers seeking to invest in India . For institution and high net worth individuals outside India, Kotak International Business offers asset management through a range of offshore funds with specific advisory and discretionary management services. Kotak Mahindra Asset Management Company offers a complete bouquet of asset management products and services that are designed to suit the diverse risk return profiles of each and every type of investor. Kotak Investment Advisors Limited focuses on the alternate asset business of the Kotak group. While the Kotak Mahindra group has been associated with private equity investment in 1997, the alternate asset group was set up early in 2005 with its first structured third party private equity and real estate funds to bring up sharper focus to this business. Kotak Mahindra Old Mutual Life Insurance is a 74:26 joint venture between Kotak Mahindra bank ltd, its affiliates and old Mutual plc. The company offers its customers a wide range of life insurance products. The company covers overs 3 millions lives and is one of the fastest growing insurance companies in India. Kotak Mahindra Prime ltd is among India’s largest dedicated passenger vehicle finance companies. It offers loans for the entire range of passenger cars, multi-utility vehicles and pre-owned cars. Also on offer are inventory funding and infrastructure funding to car dealers with strategic arrangement via various car manufactures in India as their preffered financier. India’s banking sector is a study in contrasts: it supports the world’s fastest growing large economy but is grappling with challenges that test its strength and resilience. Primary among them is the burden of distressed loans. According to reserve bank of India data, the value of gross non-performing asset (GNPA) and restructured assets reached around $150 billion . State owned banks account for more than three-fourths of stress-asset loan, which is now far higher than their net worth. Provision levels are inadequate because these banks hold only 28% of GNPAs and restructured assets as provisions. There is a gap of close $110 billion between system’s stressed assets and the provisions made. These problems are considerably less severe for private banks. Yet headline numbers do not tell the entire story, and there are many layers to the changing face of banking and finance in the world’s second most populous country. Even as legacy banks continue to be under pressure from stressed assets and stagnant loan growth ,the sector as a whole represents one of the world’s biggest opportunities to create value in banking. Macroeconomic fundamentals continue to be strong , the country is in the midst of a digital revolution , and the ongoing disruptive changes (including momentum on the regulatory front) point to possibilities for both new entrants and incumbent banks. The Indian government’s twin thrust –to encourage digital identification and cashless transactions are driving change throughout the economy. These measures picked up steam after the unique identification authority of India (UIDAI) , a statutory body responsible for providing the country’s residents with a biometric identity and a digital platform to authenticate it, was set up in 2016. The UIDAI has issued more than a billion unique identity cards, covering most of the country’s adult population. The government is pushing the whole financial system to use this unified identification system, and that as major implications for the sector. The system , which can be used not only for verifying customers but also for loans, direct transfers of subsidies, and host of other financial transactions, could change the contours of formal and informal business in India. Public sector banks are exposed to industry sectors with a higher share of non-performing loans than their private sector counterparts are. These state owned institutions have deep networks and control 70% of banking asset base. From 2009 to 2018 government made capital infusion of around $15 billion into them. But over the years, value has steadily shifted towards private-sector institutions, whose share of the sector’s asset has grown to 25%, from 21% in the past decade. ( foreign bank account for remaining 5%). The division is more apparent in the value banks created from 2006 to 2018: private banks have grown faster and generated far more value for their shareholders, with their share of market cap increasing from about 40% to nearly 70% in the same period. The expansion of upward mobility of middle class have transformed retail banking in India over the past decade. These changes to continue as about 89 million household join this social segment by 2025. Upwardly mobile customers are more discerning which is reflected in loyalty levels. Compared with their predecessors a decade ago, such consumers are half as likely to recommend a financial institution to an acquaintance and 15% more likely to shop around. They have nearly 20% more banking relationship, on average. These new customers , who represent the opening up of banking marketplace, are more likely than yesterday’s to be attracted by one or another emerging value proposition. Most of them are rapid technology adopters, whose use of the internet and mobile phones is growing. The falling cost of the internet access has facilitated the adoption of digital technologies. Digital demand has shot up in consequence – exponential growth in the number of users and internet use. More consumers rely on the internet and mobile phones to meet their banking needs. The Indian bank association survey shows that almost 80% of transactions in the newer banks are made through digital channels. The government has launched Jan Dhan program, opening bank accounts for million of previously unbanked customers to promote financial inclusion. About 280 million such accounts have been setup ,allowing users to receive government subsidies and access remittances , credit, insurance and so on. Low- cost Indian platforms have been launched to promote digital payments – for example RuPay, a cheaper domestic alternative credit or debit card gateways such as masterCard and visa; the unified payment interface (UPI) a system to facilitate the transfer of funds between banks accounts on the mobile platform; and bharat interface for money (BHIM) , a mobile app based on UPI . All these will boost banking sector in India and will create great opportunities for banks. The availability of data in India has become more democratic , and with IndiaStack and open application programming interfaces (APIs) banks can now access customer information from a single source. Many of these digital finance initiatives use the aadhaar to authenticate customers. The recently launched DigiLocker, for example , is cloud base document-respository system that enables the sharing of digitized identity documents and certificates. These developments gives banking player opportunities to build innovative business models serving millions of new customers. Both new entrants, free of legacy issue and with much lower infrastructure costs, and innovative incumbents have an advantage in reaching and serving customers. Since many existing banks have balance sheet limitations, relatively unconstrained ones have opportunities to takeover some wholesale loans on their own. In addition, disruption , both in technology and policy, could help banks to create value and increase their efficiency. With corporate loan books continuing to shrink, the next growth opportunity will be serving India’s vast number of small and medium enterprises (SMEs) . Currently most of them look to the informal sector and non banking financial companies for their financing needs. With the push from informal to the formal economy, an estimated 50 million SMEs could enter the formal banking space by 2020. This will create opportunities to banks. India’s banking sector is at crossroads. Traditional players face huge disruptions, while digital growth is propelling changes in technology and customer mind set. This period of disruption presents tremendous growth opportunities. Old banks will need to make bold moves and initiate major transformations to take advantage of them. The path for new players, which are not saddled with the problem of the past , and for existing but relatively unconstrained banks is considerably easier. Those that masters new realities could build truly world-class banking businesses at scale. Tighter integration with the daily lives of customers means that presence in the underlying payments transaction becomes key. It becomes a point of origination of customers and also banking product sales. It creates the data for making better decision on income estimation , credit worthiness etc. The increased migration from cash to digital payments in hitherto unbanked segment in India open these segment for banking intermediation at lower costs. Payments by themselves do not make a lot of money; but become both a gateway and a source of stickness in banking relationship. Banking products get reshaped to serve customer needs and become less siloed. Banks move towards having very few branches of their own, and yet have far more point of presence. To use today’s terminology, the branches are Uberised. One data point could bring out the difference sharply. For $1 billion in annual operating costs, large banks in the present , can put up roughly 6,000 branches. This feels like too many from economics standpoint, however might not still be enough to fully reach the dispered geography of India and serve customer well. Shared retail infrastructure enabled by advances in remote authentication and paperless services, supported by regulation enable a completely different physical distribution infrastructure. Banks of future have morphed so they can cover up to 1,00,000 points , without having to own many branches. Customers are served better but banks have to spend less. The similar phenomenon that unlocked ride sharing and is disrupting mobility through technology , enables superior asset sharing of physical banking infrastructure. Ongoing optimization of the partner distribution network to manage customer service and costs, therefore becomes key for bank. Banks in future will have more Artificial Intelligence models than employees. More decisions will be made by machines than humans. Banks will manage over 1,00,000 decision models with 95% of the model based on AI as their most precious asset, compared to a few thousand models in banks of the present, of which less than 10% are AI based. All these clearly demonstrate that the structure of India’s banking industry would be dramatically different from the present. The capabilities and capacities required to compete as an independent bank, are growing up sharply. Some of the market leaders , could break through and become what we call ‘ecosystem orchestrators’ . Large players who have been able to make the transition will be able to own the customer relationship and underlying data. An institutional ecosystems are emerging in India , and these are expected to collectively address revenue polls of 1-2 trillion by 2022. Such ecosystems include messaging providers, telecom companies, retail and e-commerce platform. Banks who can make the transition to being ecosystem orchestrators, will be able to embed their banking services in the non –banking journeys of their customers , making accsess to banking more convenient. In exchange , they would get a more comprehensive source of digital data to understand their customer better. Given this potential future, the intervening period could see a rise in market- driven strategic mergers and acquisitions. Investors in banks which appear to be in strategic limbo might realize that they are better of hitching their banking platforms to winners of the future as those would create value. The days of spending on technology to play catch up , while largely staying as traditional universal banks could come to an end. Potential winners, despite the concerns of integration risks, would value the deposit franchises which come with these lower performing banks. These deposit franchises have proved to be slow in moving even in face of enormous disruptions. Strategic partnerships between banks and ecosystems will rise. We would see a very different banking sector in India. Intermediation costs will fall sharply, driven by the successful banks. Margins would reduce, even as the successful banks would be profitable as operation costs gets restructured. India will become the third largest domestic banking sector by 2040 after China and U.S . The emerging economies, banking sectors are expected to out grow those in developed economies even greater margin that was projected before financial crisis. By 2040 ‘E7’( emerging economies of China, India, Brazil, Russia, Mexico, Indionesia and Turkey) could have domestic banking assets and profits that exceeding the ‘G7’ ( U.S, Japan,Germany,U.K, France, Italy , Canada) by around 50%. . With PSD2 and open banking, many countries in the European Union, including the UK, are witnessing banking renaissance with new technology savvy challenger banks leading the way with innovative mobile banking applications that customers are falling in love with.
one of the most successful fintech bank is Monzo bank. The app of Monzo bank automatically categories each transaction into groceries, bills, shopping , entertainment , and few other categories. The customer can add a custom note and scan a receipt from the store, view the total number of payments made to merchant along with total and average spends. When eating out with friends, the app allows the customer to easily split the bill with friend who have Monzo accounts. The summary view will show a breakup of all expenses grouped under different category. Customer can easily find out how much he/she have spent on groceries or any other transaction category. One can even setup spending budget per spending category with help of such apps by bank. The app is also able to intelligently shows the person the projection of his/her committed spending for month based on historical data. Overall, the mobile banking app provides a seamless customer experience which turns customer into advocates of banks. This has enabled Monzo bank to grow with word of mouth advertising. Every new customer also gets three golden tickets which can be used to invite friends and family to open a new Monzo account. All such types of banking services are yet to come in India. All these can create huge opportunities for Indian banks. Bank can also improve ease of doing business for business customers by providing direct and deep integration with accounting software with open APIs. A connected bank ecosystem will enable businesses to effectively monitor their cash flows, manages their funds better and avail fast credit without any paperwork . This is an area where standardization will make a huge difference. Regulators in EU and UK are working hard to stimulate competition and innovation in banking and to give control of banking data back to customers. People can easily switch bank accounts just as they can switch mobile operators or utility companies. Moreover , an account holders can easily get an aggregated view of their entire bank and credit card transactions across all banking relationships through third party providers ot TPPs . All such facilities are yet to come in India. It means there are huge opportunities for Indian banks to expand . Kotak Mahindra Bank has an ability to expand and adopt all modern technologies to take bank at new different level. Kotak Mahindra Bank net profit on consolidated bases grw from Rs 524.48cr in March 2007 to Rs 7,119.70 cr. Kotak Mahindra Bank has never made a loss from year 2007 till present year. Its asset quality improved in FY19 with gross non-performing assets ratio- bad loans as a percentage of gross advances –declining to 2.14% versus 2.22% in the previous year. Net NPA also declined to 0.75% as compared to 0.98% in the corresponding last year. As on March 2019 , the bank’s balance sheet grew 17.83 % to Rs 3.12 lakh crore as against Rs 2.65 lakh crore on March 2018. The bank’s advances grew 21% to Rs 2,04,695 crore versus Rs 1,69,718 crore in last fiscal .Government of India and Reserve Bank Of India has made new law called insolvency and bankruptcy code (IBC) for defaulters. With help of this law there are less chances of further increase in NPAs By all these I prefer buy call on Kotak Mahindra Bank ltd.