Kotak’s Vaswani hopes that NRC will broaden CEO search beyond internal bench

Mumbai: Kotak Mahindra Bank’s search for its next chief executive is likely to extend beyond its internal leadership ranks, with outgoing managing director and chief executive officer Ashok Vaswani saying that he expects the Nomination and Remuneration Committee (NRC) to look broader while choosing his successor.

Vaswani, who will step down as the bank chief in December, said during its June-quarter earnings media call that the board and the NRC were very conscious of regulatory timelines and would submit applications to the Reserve Bank of India accordingly.

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

Usually, bank boards send a list of candidates for the top post to the central bank about six months before the incumbent’s tenure ends. Typically, banks 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 non-promoter CEO in January 2024, said his decision to step down was driven by both professional and personal considerations.

“There is never a good time to call it a day,” he said, adding that over the past three-and-a-half years the bank had undertaken ‘a lot of heavy lifting’ by rebuilding its management team, addressing issues in its unsecured lending businesses, and strengthening its liabilities franchise.

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

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

Bank eyes NRI deposits, flags West Asia risks

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

Calling FCNR-B ‘a very interesting opportunity’, Vaswani said customer demand from non-resident Indians was strong and that the bank would source deposits through its presence in GIFT City and the Dubai International Financial Centre (DIFC). It is also partnering with banks across Asia, West Asia and other geographies to strengthen its offering.

While declining to disclose internal mobilisation targets or the extent of leverage being offered, Vaswani said leverage would be available only 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 the three-year and five-year FCNR-B deposits would help lengthen Kotak’s liability profile. “Our deposit book is relatively short tenor. This will effectively help us elongate our deposit book to some extent and create a greater degree of stability,” he said.

While FCNR-B inflows would not move the needle entirely, they would have a meaningful impact, he said. For the quarter ended June, average deposits increased 14% on year and 2% on quarter to ₹5.67 trillion.

Vaswani also said that geopolitical tensions in West Asia had weighed on capital markets and led to delays in initial public offerings, which impacted the bank’s investment banking business.

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

Profit rises 26%, asset quality strengthens

On the broader impact of the conflict, Vaswani said disruptions to supply chains and inflationary pressures had emerged due to uncertainty around shipping routes, including the Strait of Hormuz. However, he said the bank has not seen any signs of stress in its loan portfolio so far.

“We are constantly, very closely monitoring all our portfolios… As of now, we are seeing no sign of stress. But, are we cautious? Yes, we are cautious,” he said.

The bank's customer assets grew 16% year-on-year to ₹5.71 trillion. Kotak Mahindra Bank reported a 26% year-on-year rise in standalone net profit to ₹4,123 crore in the first quarter of FY27, while net interest income (NII) increased 9% on year to ₹7,259 crore.

Asset quality strengthened, with the gross non-performing assets ratio declining to 1.18% from 1.48% a year earlier and net NPA easing to 0.27% from 0.34%.

However, slippages increased sequentially to ₹1,485 crore from ₹1,327 crore, while credit costs rose to 46 basis points from 39 bps in the preceding quarter, which the management attributed to seasonality in its tractor finance portfolio.