Uday Kotak’s Losses Reach Rs 10,800 Crore in a Single Day Following RBI Action

Uday Kotak, the founder of Kotak Mahindra Bank Ltd., has faced a significant challenge as India’s regulator imposed a surprise ban on the bank. This resulted in a sharp decline in the bank’s shares and a substantial decrease in Uday Kotak’s wealth, amounting to $1.3 billion. The ban prohibits the bank from adding new customers through its digital channels and issuing fresh credit cards. This has caused the lender’s shares to plummet by as much as 13%.

As the largest shareholder, with a stake of almost 26%, Uday Kotak bore the heaviest impact from the selldown, resulting in the most significant drop in four years. The Reserve Bank of India cited concerns about governance and risk issues in Kotak’s technology systems as reasons behind the ban. The regulator found deficiencies and non-compliance in various processes over two years, including data security, leak prevention strategies, and vendor risk management. In response, Mr. Kotak stated that the bank has taken measures to strengthen its IT systems and is committed to resolving the issues with the RBI at the earliest.

This is not the first time Uday Kotak has faced regulatory challenges. He previously engaged in a legal battle with the central bank over the size of his stake in the lender, which was ultimately resolved in 2020. The bank has also undergone leadership changes, with Ashok Vaswani being appointed as the new CEO this year. Uday Kotak, who has been at the helm of Kotak Mahindra Bank since its establishment, has seen the bank’s significant growth, particularly in digital transactions, making it one of the slowest lenders for physical branch expansions.

The ban on online customer acquisition is expected to impact the bank’s growth and create negative sentiment among investors.