Uday Kotak Grows 10,800 Crore Shrinking in One Day Due to RBI Action

Uday Kotak, the founder of Kotak Mahindra Bank Ltd., has faced a significant challenge recently when the Indian regulator imposed a surprise ban on his bank, resulting in a notable drop in his wealth. This ban restricts the bank from adding new customers through digital channels and issuing fresh credit cards, causing a substantial decline in the lender’s shares and leading to a significant dip in the billionaire founder’s wealth. As the largest shareholder with a stake of almost 26%, Uday Kotak experienced a $1.3 billion decline in his wealth, impacting his net worth, which stood at $14.4 billion as of April 24.

At the same time, rival Axis Bank Ltd. overtook Kotak’s market capitalization for the first time since September 2016, buoyed by its strong performance in the market. The Reserve Bank of India cited governance and risk issues about Kotak’s technology systems as reasons behind the ban, highlighting deficiencies and non-compliance in various processes. In response, Mr. Kotak emphasized that the bank has been taking measures to strengthen its IT systems and is committed to working with the RBI to resolve the issues swiftly.

This is not the first time Mr. Kotak has encountered regulatory challenges. In the past, he had a legal dispute with India’s central bank over his stake in the lender, ultimately agreeing to reduce his ownership in 2020 to resolve the feud. Amid these challenges, Ashok Vaswani was appointed as the new Chief Executive Officer of Kotak Mahindra Bank this year, emphasizing the critical role of scale and technology in the bank’s growth.

Uday Kotak’s journey from setting up an investment company in 1985 to leading Kotak Mahindra Bank since its inception and gaining more control of it over the years reflects his entrepreneurial spirit and strategic vision. The ban on online customer acquisition is expected to impact the bank’s growth, particularly due to its reliance on digital channels as opposed to extensive physical branch expansions. Analysts anticipate a negative sentiment around the bank due to the RBI ruling.

In summary, Uday Kotak, a prominent figure in the Indian banking sector, is navigating a challenging period as his bank faces regulatory hurdles and market shifts, putting his leadership and the bank’s growth trajectory to the test.