Kotak Mahindra Bank has recently made a strategic move by hiring an ex-Citi executive to drive their credit card business. This move aligns with their focus on expanding their credit card offerings. The bank's credit card business has been steadily growing, accounting for 11 percent of unsecured loans.
Their ambition is to scale this to 15 percent, which includes an emphasis on credit cards and presence in 11 states, including through microfinance institutions (MFIs), said lender's management at the Spark Conference.
In the first quarter of FY24, the lender noted an increase of 18 percent in customer assets, including advances and credit substitutes. The bank's unsecured retail advances (including Retail Micro Finance) accounted for 10.7 percent of net advances as of June 30, up from 7.9 percent a year ago, with growth across segments such as credit cards, personal and business loans and MFI.
Notably, Kotak Mahindra Bank has also tapped into the younger demographic with its 811 accounts, with 81 percent of these customers being below the age of 35. This has been facilitated by offering products such as secured credit cards and personalised debit cards featuring visuals of their own IPL team, resulting in higher uptake from these account holders, the bank said.
Furthermore, the bank's emphasis on liability products, such as savings accounts and active money, has been gaining traction. They have managed to maintain a saving accounts rate of 6 percent for a decade and have reduced the SA rate differential to 50 bps compared to peers.
The launch of "active money" accounts, which offer a competitive interest rate of 7 percent for a 180-day period, has garnered attention and helped attract deposits. While active money costs more than savings accounts, it remains lower than term deposits, Kotak Mahindra Bank said at the conference.
The
bank launched the ActivMoney feature in June. This gives customers the benefit of fixed deposit (FD) like the interest of up to 7 percent and the flexibility to access funds anytime. Through Kotak Mahindra Bank's ActivMoney, excess funds in the account, beyond a defined threshold, are automatically transferred into a fixed deposit, thereby helping customers earn a higher interest on their savings.
Kotak Bank's focus on small-ticket, sticky loans, and their commitment to value over sheer size, has kept their yields better despite the competitive intensity in the market. The bank has also diversified its offerings, including catering to government accounts and signing partnerships with entities like the Indian Army, defence, and NHAI, contributing to larger deposits, the lender noted.
Regarding credit cards, the bank is exploring various avenues, experimenting with different cohorts for both personal loans and credit cards. The credit card business is particularly intriguing due to its customer base of salaried individuals. The bank said it has invested in marketing and customer experience personnel, as well as a Chief Technology Officer (CTO), in line with its 30-month plan to build resilient and scalable transactional volumes.
Despite the digital push, the bank said it still sees substantial customer additions from branches, contributing 150,000-200,000 new customers per month compared to 600,000 customers acquired through digital channels. While they don't anticipate expanding to 5,000-7,000 branches, they aim to shift their segment focus to increase the consumer segment while reducing the wholesale business.
Meanwhile,
Kotak Mahindra Bank recently surpassed street estimates in the first quarter of FY24 as its standalone net profit rose to Rs 3,452.30, representing a 67 percent year-on-year growth for the April-June quarter. The growth was attributed to increased net interest income and strong loan growth.
First Published: Aug 17, 2023 11:47 AM IST
