Kotak Mahindra Bank Shifts Focus to Physical Branch Expansion

Facing a ban on digital customer onboarding, Kotak Mahindra Bank is changing its growth strategy by focusing on expanding its physical branch network.

The bank, which opened fewer than 350 branches in the past four years, now plans to open 200 branches this fiscal year. It has also introduced a new distribution structure combining physical branches, digital channels (mobile and net banking), and voice channels.

“The new distribution structure shows our commitment to making banking services easily accessible and reliable for our customers,” said Ashok Vaswani, CEO of Kotak Mahindra Bank. “We are excited about this strategic move and believe it will help us deliver great value to our customers.”

This shift comes after the Reserve Bank of India (RBI) banned Kotak Mahindra Bank from issuing new credit cards and onboarding new customers through online and mobile banking channels in April. The bank had relied heavily on its digital channels, with 95% of new personal loans and 99% of new credit cards issued digitally in the last quarter of 2023.

Industry experts noted that Kotak’s slow branch expansion has been a concern. Suresh Ganapathy, head of financial services research at Macquarie Capital, pointed out the bank’s reluctance to open more branches, with fewer than 350 opened in the last four years.

Some analysts predict slow loan growth for Kotak in the June quarter, with the bank’s earnings report due on July 20. However, there is optimism for the future.

“Looking ahead to FY25, Kotak’s strong deposit growth suggests a potential business revival,” said Ajit Kumar Kabi, banking analyst at LKP Securities. “We expect margins to remain steady, supported by favourable credit costs.”

Kotak Mahindra Bank is adapting to the challenges and positioning itself for growth through a balanced approach to physical and digital banking services.