On 27 June, Kotak Mahindra Bank informed stock exchanges that its managing director and chief executive officer, Ashok Vaswani, would not seek reappointment after completing his three-year term in December 2026.
Although the announcement came was unexpected, Vaswani's continuation was never a certainty. Ever since he stepped into the large shoes of founder Uday Kotak in January 2024, his tenure has been defined by regulatory setbacks, slowing profitability despite healthy balance-sheet growth, elevated employee attrition, muted shareholder returns and the continuing shadow of the bank's promoter.
Promoter-led model
It was Uday Kotak who formed Kotak Mahindra Finance back in 1985 and built it into a leading non-banking finance company (NBFC). In 2003, he transitioned that NBFC into a bank—the first NBFC to do so.
Over the next two decades, he built Kotak Mahindra Bank into the third most prominent private sector bank, along with Axis Bank. While HDFC Bank and ICICI Bank remained the polestars in private banking, Kotak Mahindra Bank and Axis Bank were seen as the two that could bridge the gap to them.
Uday Kotak ran into the regulator. Reserve Bank of India (RBI) rules on CEO appointments capped the tenure of promoters at 12 years, with an extension to 15 years, while linking it to a dilution in promoter shareholding. Uday Kotak had to step down.
In the 15 years from June 2006 to June 2021, Kotak Mahindra Bank delivered the highest shareholder returns among the five leading banks of today, underscoring the robust, high-quality growth achieved under his stewardship. The past five years have been another story, though.
Regulatory rap
Half of these five years have been under Vaswani, who was drafted in from outside. Previously, Vaswani had worked at Citigroup and Barclays. He took over on 1 January 2024 on a three-year term. In April 2024, four months into his stint, the RBI banned Kotak Mahindra Bank from onboarding new customers via online and mobile banking channels, and from issuing new credit cards. It lifted the ban in February 2025, but that 10-month embargo ended up causing both financial and reputational damage.
The embargo severely impacted Kotak Mahindra Bank’s credit card franchise, creating a sharp contrast with its expanding peers. Between April 2024 and February 2025, Kotak Mahindra Bank’s active card base contracted by 17%, from 6 million to about 5 million.
While it was losing 1.04 million card accounts, its four leading competitors added anywhere between 0.55 and 2.80 million card accounts. Alarmingly, the lifting of the ban in February 2025 did not trigger an immediate turnaround. By May 2026, Kotak Mahindra Bank's card base shrank further to 4.8 million, even as others gained further.
Profit pressure
The pullback on the credit card side has impacted Kotak Mahindra Bank, as credit cards are a core driver of non-interest fee income and high-yield revolving interest. Even as Kotak Mahindra Bank tries to revive growth in credit cards, overall growth as such is not a challenge.
In its last analyst call in May 2026, after Kotak Mahindra Bank announced year-on-year growth of 16.2% in net advances and 14.9% in average deposits for 2025-26, Vaswani said, “This growth is in line with our stated philosophy of responsibly growing our advances in the range of 1.5x to 2x nominal GDP growth.”
The challenge for Kotak Mahindra Bank is how that growth on the balance sheet side is reflected in its profit and loss statement. Be it income or profit, 2025-26 saw growth contract to single digits—a big comedown over the previous four years.
This deceleration reflects both systemic headwinds and company-specific shocks. Sector-wide, Indian banks have battled intensifying deposit competition and compressed margins. For Kotak Mahindra Bank, these challenges were compounded by regulatory penalties, which affected its retail business.
Margin squeeze
For the banking sector, net interest margin (NIM) is a widely tracked measure of profitability. Historically, Kotak Mahindra Bank has shown a high NIM, which surged to new highs during the post-pandemic retail consumption and lending boom.
One reason for Kotak Mahindra Bank’s high NIM was the high proportion of current accounts (on which a bank pays no interest) and savings account (on which leading banks pay nominal interest) in its total deposits. For Kotak Mahindra Bank, this CASA ratio was about 61% in 2021-22. While it has reduced since, it’s still in the mid-40s, and more than peers.
In the last two years, NIM have fallen for all banks, amid rising deposit rates and an intense scramble for retail loans. Kotak Mahindra Bank’s NIM compression was exceptionally severe, tumbling 72 basis points (100 basis points equal 1 percentage point) between 2023-24 and 2025-26. During part of this period, Kotak Mahindra Bank was barred from onboarding customers digitally. By comparison, ICICI Bank has seen a drop of 21 basis points and Axis Bank of 38 basis points.
Battle of attrition
Even with this margin erosion, Kotak Mahindra Bank’s NIM in 2025-26 was higher than that of ICICI and Axis. That’s a testament to the institutional foundation that Kotak Mahindra Bank has built and has going for it.
Even with all the hardships of the last two years, it has a market capitalization of ₹4.1 trillion—roughly about one-third of market leader HDFC Bank and about 5% less than that of Axis Bank.
The ongoing succession uncertainty suggests that moving away from Uday Kotak Mahindra Bank's promoter-led model continues to weigh on investor sentiment and market valuation. One challenge for the new CEO would be retaining talent. Between 2022-23 and 2024-25, leading private banks saw a steady decline in attrition.
However, Kotak Mahindra Bank’s turnover rate remains the highest among its peers—33.3% in 2024-25, the latest available.
While it’s difficult to say how much of this is intertwined with internal corporate disruptions, Kotak Mahindra Bank has work to do to get back on the path of consistent and profitable growth, and it starts with a new CEO appointment.
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