AI risks keep me up at night, says Kotak Bank CEO

MUMBAI: Rapid advances in artificial intelligence (AI), including tools like Claude and emerging systems such as Mythos, are reshaping how banks assess cybersecurity risks, with the speed and scale of potential attacks emerging as a key concern, Kotak Mahindra Bank managing director and chief executive officer Ashok Vaswani said on Friday.

“If there is one thing that keeps me up at night, surely this is the one,” Vaswani said at the bank’s March quarter (Q4FY26) earnings conference, pointing to the pace at which AI-driven threats could evolve. “The nature of cyber risk is fundamentally changing. We have always been geared up to deal with cyber attacks at the speed of a human. Now we have to deal with cyber attacks at the speed of a machine.”

This shift, Vaswani said, requires banks to significantly upgrade their response capabilities—from identifying vulnerabilities faster to deploying fixes at scale.

The concern is also gaining traction at the policy level. Finance minister Nirmala Sitharaman last week asked banks to prioritize strengthening their cyber defences, promptly report suspicious digital activity, and engage top cybersecurity experts, according to a finance ministry statement posted on X.

Chairing a high-level meeting with scheduled commercial banks and key stakeholders, Sitharaman said the evolving threat posed by the latest AI models was unprecedented and required a high degree of vigilance, preparedness, and stronger coordination across financial institutions. She advised the Indian Banks' Association (IBA) to develop a coordinated institutional mechanism to respond swiftly and effectively to such threats.

The meeting comes amid growing concerns within the financial sector over potential disruptions and risks linked to recent advances in AI, prompting the government and regulators to undertake a closer assessment.

As advanced AI systems become more widely adopted by large global firms, vulnerabilities could propagate more quickly across interconnected systems. “Our ability then to patch at a very enhanced rate is going to be necessary,” Vaswani said, adding that teams within the bank are already completely conscious and preparing for this transition.

Earnings, margins and external risks

When asked how the bank is coping with the impact of the West Asia war, Vaswani said the ongoing crisis has not yet materially affected the bank’s books, though risks remain. “These supply chain disruptions, to date, have not shown up in our numbers.”

However, he cautioned against complacency. “It would be naive to assume that there is no impact…depending on how long this goes on, the more the impact,” he said.

The bank has stepped up monitoring across portfolios and is engaging with customers to assess contingency plans. “What really worries us is the second, third-order kind of impact… where you don’t see a direct impact but suddenly it comes out of nowhere,” he added.

Lower provisions, improvement in asset quality and strong credit growth helped Kotak Mahindra Bank report a net profit of ₹4,027 crore for Q4, up 13% on year and 17% on quarter.

Provisions fell to ₹516 crore from ₹909 crore a year ago and were down 36% sequentially. Credit cost on an annualized basis was at 0.39% against 0.63% a quarter ago.

The bank’s loan growth rose 16% on year to ₹4.96 trillion and deposits grew 15% on year to ₹5.72 trillion. While the private sector bank refrained from giving an outlook on credit and deposit growth, the management expects margins to come under some pressure.

The bank indicated that while deposit repricing has largely played out, net interest margins could soften gradually.

“Going forward, we expect a more gradual decline in margin,” chief financial officer Devang Gheewalla said, adding that the movement is likely to be range-bound and not as sharp as the current year.

Net interest income rose 8% on year to ₹7,876 crore. Net interest margin stood at 4.67% at the end of March against 4.54% a quarter ago.