RBI picks outsider to run Kotak
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RBI picks outsider to run Kotak

KVS Manian has been overlooked in favour of ex-Barclays man Ashok Vaswani. What does it mean for one of India’s finest banks?

Key Speakers at The Singapore FinTech Festival
Pagaya president Ashok Vaswani was the 'surprise' external choice for Kotak Mahindra | Photo: Bloomberg via Getty Images

Last month, Euromoney wrote this about the succession plans at Kotak Mahindra: “Egon Zehnder has been appointed to help with succession, but it would be a huge surprise if the bank went external, given the bench strength.”

Well, consider us hugely surprised.

On October 23, the Reserve Bank of India, which had been given a choice by the Kotak Mahindra board between an internal and external candidate, opted not for front-runner KVS Manian, as had been widely expected, but for Ashok Vaswani, whose career has largely been forged outside India. It is thought Vaswani’s presence on the two-person shortlist was itself due to the RBI telling Kotak it didn’t just want to see internal candidates put forward.

Kotak Mahindra is an institution that has made its name by promoting clever people from within. As we reported last month, Manian was only one of several strong potential internal candidates, others including joint managing director Dipak Gupta and whole-time director Shanti Ekambaram.

Some think that the RBI may have feared that departing CEO Uday Kotak would still have held sway over his former colleagues. Clearly, he will continue to have a significant influence: he is the largest shareholder in the bank and still serves on its board.

For his part, Uday struck a positive tone in his response to the news. “Ashok is a world-class leader and banker with digital and customer focus,” he said in a Kotak Mahindra announcement. “I am proud that we bring a ‘Global Indian’ home to build Kotak and India of tomorrow.”

Digital strength

Uday is correct about the digital and customer bit. Vaswani was CEO of Citi’s consumer bank operation in Asia Pacific from 2004 to 2007. He turned to Barclays in 2010, running European cards, then Africa, then retail banking and later personal and corporate banking, before becoming the CEO of Barclays UK in 2016. After three years of that he ran global consumer and payments before becoming chief digital officer in November 2021.

Although he only lasted nine months in that role before becoming president of Pagaya, an AI fintech, he did preside over a digital transformation in the Barclays payment system, and that may well have been appealing to the RBI.

Large parts of Kotak Mahindra’s second-quarter earnings update, which came on the same day as the announcement, were about digital. There was a section promising investment in the bank’s technology backbone, the development of AI and machine learning tools, the use of data analytics across the bank, and updates on new digital launches. It is clear that digital development is going to be key to the further development of the bank and Vaswani will be expected to steward it.

The market will take some convincing, though: the Kotak Mahindra share price dropped on the news, and Jefferies cut its buy recommendation to hold. Vaswani’s job of convincing them otherwise will begin on January 1.

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