Kotak's Vaswani hopes the NRC will expand its search for CEOs beyond the internal benchmark

Mumbai: Kotak Mahindra Bank’s search for its next chief executive is likely to go beyond its internal leadership, with outgoing managing director and CEO Ashok Vaswani saying he expects the Nomination and Remuneration Committee (NRC) to take a broader look at selecting his successor.

Vaswani, who will step down as bank chief in December, told the media during his earnings call in June that the board and the NRC were very aware of the regulatory timelines and would submit requests to the Reserve Bank of India accordingly.

“…Internally we have a very strong bench but I am sure the NRC will look broader,” Vaswani said during a media call on Saturday.

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Kotak Mahindra Bank’s search for a new CEO is likely to expand beyond internal candidates as the nomination and remuneration committee is expected to consider a wider range of applicants.

Ashok Vaswani is stepping down for professional and personal reasons, including the compelling personal aspect of becoming a grandfather and family commitments abroad.

Kotak Mahindra Bank aims to mobilize FCNR-B deposits by leveraging its presence in international financial centers such as GIFT City and partnering with banks in various regions, targeting strong demand from non-resident Indians.

Geopolitical tensions in West Asia have negatively affected capital markets, causing delays in IPOs and affecting the bank’s investment banking business, although it has yet to show signs of strain in its loan portfolio.

Kotak Mahindra Bank’s gross non-performing asset (GNPA) ratio improved to 1.18% from 1.48% and net NPA ratio decreased to 0.27% from 0.34%, indicating strengthening asset quality.

Bank boards usually send a list of candidates for the top post to the central bank about six months before the end of the current official’s term. Banks usually submit at least three names, including internal and external candidates, for the regulator’s consideration.

Vaswani, who took over as Kotak Mahindra Bank’s first long-term CEO in January 2024, said his decision to step down was driven by both professional and personal reasons.

“It’s never a good time to do it overnight,” he said, adding that the bank had undertaken “a lot of hard work” over the past three-and-a-half years by rebuilding its management team, addressing its non-secured loan problems and strengthening its debt franchise.

“I think the bank and the group are now very well placed to accelerate our journey, so it may not be a bad time to leave,” he said.

On a personal note, Vaswani said becoming a grandfather also influenced his decision. “My daughter is in San Francisco, so calling from San Francisco, calling from a daughter, it was even more compelling,” he said.

The bank eyes NRI deposits and highlights West Asian risks

The lender also outlined its strategy to mobilize non-resident banks’ foreign currency deposits (FCNR-B) under the Reserve Bank of India’s recently announced scheme.

Describing FCNR-B as a “very interesting opportunity”, Vaswani said customer demand from non-resident Indians is strong and the bank will attract deposits through its presence in GIFT City and the Dubai International Financial Center (DIFC). It is also working with banks in Asia, West Asia and other geographies to strengthen its offering.

While Vaswani declined to disclose the internal mobilization targets or the extent of leverage offered, he said leverage would only be available for deposits above a certain size and would depend on partner banks, the bank’s capabilities and the availability of funding.

He also said that FCNR-B’s three-year and five-year deposits would help extend Kotak’s liability profile. “Our pass book is relatively short. This will effectively help us extend our pass book to some extent and create a greater degree of stability,” he said.

While the influx of FCNR-B wouldn’t move the needle entirely, he said, it would have a significant impact. For the quarter ending in June, average deposits rose 14% year-on-year and 2% quarter-on-quarter. ₹5.67 trillion.

Vaswani also said geopolitical tensions in West Asia have hit capital markets and led to delays in initial public offerings, impacting the bank’s investment banking business.

“Capital markets business has felt the impact of the prevailing geopolitical situation,” he said, adding that despite the postponement of some IPOs, investment banking remained robust.

Profit increased by 26%, asset quality is strengthening

As for the broader impact of the conflict, Vaswani said disruptions to supply chains and inflationary pressures have emerged due to uncertainty around shipping lanes, including the Strait of Hormuz. However, according to him, the bank has not yet seen any signs of stress in its loan portfolio.

“We are constantly, very carefully watching all of our portfolios … As of right now, we don’t see any signs of stress. But are we cautious? Yes, we are cautious,” he said.

The bank’s client assets grew by 16% year-on-year. ₹5.71 trillion. Kotak Mahindra Bank reported a 26% year-on-year rise in standalone net profit. ₹4,123 crore in Q1FY27, while Net Interest Income (NII) increased by 9% YoY to ₹7,259 crores.

Asset quality strengthened, gross non-performing asset ratio fell to 1.18% from 1.48% a year earlier and net NPAs reduced to 0.27% from 0.34%.

However, the slips gradually increased ₹1,485 million crowns ₹1,327 trillion, while credit costs rose to 46 basis points from 39 basis points in the previous quarter, which management attributed to seasonality in its tractor financing portfolio.