Kotak Mahindra Bank Ltd. is on the lookout for acquisitions as the billionaire Uday Kotak-backed lender seeks to deploy its excess capital to scale up amid a transformation of India’s financial industry.
India’s fourth-largest private sector bank by assets is open to evaluating potential targets that would advance its strategy, according to CEO Ashok Vaswani. The firm has the capacity to do jumbo deals, he said in response to a question on whether transactions above $1 billion are possible.
“Kotak today carries significantly more capital than what regulators require,” he said in an interview. “We’re not going to waste that capital.” Vaswani began his role in January 2024 after spending decades overseas in top positions such as heading Barclays Bank UK and Citigroup Asia Pacific.
The Mumbai-based bank looks at three criteria when studying M&A—whether it adds to its agenda, if the valuation makes sense and the cost of management distraction, according to Vaswani.
His comments come as consolidation gathers pace across India’s financial sector. Japanese and Middle East buyers are expanding in the world’s fastest-growing major economy, where Prime Minister Narendra Modi’s government is pushing to strengthen state‑backed lenders and also courting private and foreign capital.
Kotak Mahindra Bank had a capital-to-risk ratio of 22.6% at the end of December, well above peer levels and regulatory requirements, signalling it has ample firepower for potential takeovers. Vaswani said that while the financier will always remain “opportunistic” on inorganic expansion, internal growth is its primary focus.
The lender has struck deals including buying a personal-loan portfolio from Standard Chartered Plc and acquiring micro lender Sonata Finance in 2024. Most recently, it expressed interest to acquire a $8 billion stake in IDBI Bank Ltd. but didn’t pursue it further. Separately, the firm is among the suitors for Deutsche Bank AG’s India retail assets, people familiar with the matter have said. Vaswani declined to comment on the interest in Deutsche Bank’s assets.
Analysts said that Kotak Mahindra Bank had found it challenging in recent years to deploy its extra capital. Lenders in India must maintain a minimum capital of 9% of their risk-weighted assets, as per regulatory norms.
“The bank has cherry-picked deals and has not been taking on incremental risks to grow its book aggressively,” said Amit Khurana, head of equities at Dolat Capital. “While there may be scope to deploy excess capital to grow organically, we see limited opportunities and targets available for making jumbo deals.”
Vaswani’s appointment was a break from its financier founder, who had led the bank since its inception as a shadow lender in 1985.
It hasn’t been an easy journey for Vaswani. Some senior executives of the firm left after he took charge. A few months later, it was barred from adding new online customers due to technology shortcomings. Stress in the broader microfinance industry also forced the bank to rein in growth.
“I feel good about where we are now,” Vaswani said. “We didn’t try to put lipstick on the pig—we actually fixed the issues.” The ban on onboarding new online clients was lifted after nearly 10 months.
Despite being an outsider, Vaswani said that having the founder available as a sounding board gives him an advantage over many banking chiefs. “I see many CEOs spending millions of dollars on consultants and even more on coaches and mentors. In my case, I have someone who is extremely knowledgeable, very smart and has built an incredible business,” he said. “If I’m thinking about something on a Sunday afternoon over tea, I can call him and bounce an idea off him.”
Kotak is Asia’s richest banker with a net worth of $14.4 billion, according to the Bloomberg Billionaires Index, and owns more than 25% of the lender as of end-December.
Vaswani said the arrangement works because the founder has “tremendous skin in the game”. The two bring complementary strengths, he said, referring to Kotak’s prowess as a dealmaker and his abilities to build processes and drive automation across the bank.
Refreshing the leadership bench has also been a priority for Vaswani.
Rather than extending tenures for senior executives, the lender opted to build what Vaswani described as a “younger, hungrier and leaner” leadership team to steer the next phase of growth. At the same time, the financial services behemoth unified its brand and sharpened strategy around four customer segments: affluent clients, mass-market consumers, small and medium enterprises, and institutional customers, he said.
Kotak Mahindra Bank currently ranks behind private sector rivals such as HDFC Bank Ltd., ICICI Bank Ltd. and Axis Bank Ltd. Even as it seeks to expand, the bank is prioritizing profitability and Vaswani said its growth must remain disciplined. “Scale for the sake of size is not exciting. What matters is scale with relevance.”
