UDAY KOTAK LOSES $1.3 BILLION! ASIA'S RICHEST BANKER HIT BY RBI ACTION AGAINST KOTAK MAHINDRA BANK

Uday Kotak LOSES $1.3 BILLION! Uday Kotak, the visionary behind Kotak Mahindra Bank Ltd., has steered the institution to remarkable heights over decades, earning him the title of Asia's richest banker. However, his leadership faces a formidable challenge following a surprise ban imposed by India's regulatory authority, marking one of his most significant tests yet and resulting in a notable decline in his wealth.

As per Bloomberg report, the bank's shares plummeted by as much as 13% on Thursday in response to the ban, which prohibits the bank from acquiring new customers through its digital channels and issuing fresh credit cards. As the largest shareholder with nearly 26% stake, Kotak experienced the brunt of the market downturn, witnessing his wealth decrease by $1.3 billion, according to the Bloomberg Billionaires Index, leaving him with a net worth of $14.4 billion as of April 24.

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Adding to Kotak's woes, rival Axis Bank Ltd. surpassed Kotak Mahindra Bank in market capitalization for the first time since September 2016, fueled by a surge in its shares following better-than-expected earnings.

The Reserve Bank of India (RBI) cited concerns over governance and risk related to Kotak's technology systems as the rationale behind the ban. The RBI identified deficiencies and non-compliance in various processes spanning two years, including issues with data security, leak prevention strategies, and vendor risk management, according to a statement issued late Wednesday.

In response, Kotak emphasized the bank's commitment to strengthening its IT systems through the adoption of new technologies and pledged to collaborate with the RBI to promptly address any outstanding concerns.

This is not Kotak's first encounter with regulatory scrutiny. Previously, the billionaire engaged in a legal battle with the central bank over his ownership stake in the lender, ultimately agreeing to reduce his holdings in 2020, thereby resolving the dispute.

Transitioning leadership to new CEO Ashok Vaswani earlier this year, Kotak underscored the importance of scale for the bank's growth trajectory. Vaswani has emphasized the bank's investments in technology as a key pillar of its strategy.

As per Bloomberg report, Kotak's journey began in 1985 when he established an investment firm with a modest 3 million rupee loan ($41,000) from family and friends. Partnering with Mahindra the following year, Kotak steadily transformed the firm into Kotak Mahindra Bank, assuming the role of CEO from its inception and gaining greater control in 2006 by concluding a longstanding partnership with Goldman Sachs Group Inc.

With nearly all of Kotak's savings account transactions conducted through digital or non-branch methods, the ban on online customer acquisition is poised to impact the bank's growth trajectory, particularly given its limited physical branch expansion. Analysts anticipate a negative sentiment surrounding the bank in light of the RBI ruling.

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2024-04-25T12:33:45Z dg43tfdfdgfd