New Delhi, Aug. 27 -- Kotak Mahindra Bank (Kotak) has been on a digital transformation journey for the last two years, which spans its businesses spread across different entities, including the commercial bank, wholesale bank, enterprise businesses covering treasury, risk, finance and HR, and retail.
According to Nilesh Chaudhari, Head of Technology of Corporate, Commercial, and Functions at Kotak, last year's RBI restriction gave the bank a much-needed impetus to further this process.
To be sure, the central bank imposed supervisory restrictions in April 2024 due to issues like business outages and disruptions to its digital platforms. In February, the Reserve Bank of India lifted the supervisory restrictions on Kotak Mahindra Bank after the latter rectified deficiencies in its IT infrastructure. With the lifting of the ban, Kotak Mahindra Bank can now resume onboarding new customers digitally and issuing new credit cards.
That period of scrutiny accelerated Kotak's investment in technology. The bank spent over Rs.1,700 crore in the year ended March 31, more than 30% higher than the previous year, amounting to about 10% of operating expenses.
"The RBI's recent restrictions, though challenging, actually gave us the opportunity to clear a lot of legacy tech debt. The embargo allowed the entire bank, from control to support to technology, to focus on raising our standards. Our technology investment over the last two years is in line with industry benchmarks, and that level of focus will continue," Chaudhari said in an interview with TechCircle.
Tech debt is the future cost that arises when technology teams take quick or less-than-ideal shortcuts in software development. It eventually has to be "repaid" through refactoring and debugging. If left unaddressed, tech debt can slow development, increase costs, and reduce the overall quality of software over time.
"Tech debt will always exist because of the trade-offs between speed, cost, and time-to-market. The key is to keep it under control. With the right governance, platforms, and talent, we are building Kotak into a truly tech-led bank," Chaudhari noted.
The bank has also now instituted the IT Risk and Information Security Committee (IRISE), of which Chaudhari is a part. "Committee has both internal and external experts to proactively manage risks, monitor key indicators, and take action when required. An Architecture Board also ensures that new solutions are scalable and sustainable, preventing long-term costs of tech debt," he said.
A central piece of the transformation is Kotak's proprietary AI platform, Kotak AI. Its architecture starts with a model layer of 12 large language models (LLMs) from multiple providers. A router layer sits above, selecting the most suitable model for a given task. On top of that, Kotak builds specialised AI "skills," which can then be orchestrated by agents to complete end-to-end tasks.
"Kotak AI is already in use for credit analysis, where analysts can process vast amounts of data faster while staying in the loop, for customer-facing staff who can now query internal processes in natural language, and even for coding assistance used by our developers," Chaudhari said.
This solution has been largely built in-house. "To be a tech-led bank, we need to iterate and experiment rapidly while controlling costs. Buying platforms often means longer timelines for customisation and higher costs, so by building them ourselves, we gain an enduring competitive advantage," he said.
Kotak's technology team has over 2,000 full-time employees, supported by another 2,000 through partners. The team was largely concentrated at the Mumbai headquarters, but over the last three to four years, the team has spread across Gurgaon, Bengaluru, and Hyderabad. As part of the transformation, the bank has set up hubs in Bengaluru and Hyderabad to tap into engineering talent.
"We have invested heavily in hiring core engineering talent, because the banking industry has been shifting away from heavy dependence on vendors and off-the-shelf products. While partnerships will always play a role, the focus now is on building in-house capabilities that give us long-term differentiation," Chaudhari said.
Kotak's broader strategy is to build platforms - both technical and functional, that act as reusable building blocks for faster innovation. These cover areas like identity and access management, customer payment instruction systems, and the bank's cloud-based Data Exchange (DEX) platform, which supports personalisation and compliance with the Digital Personal Data Protection (DPDP) Act.
Published by HT Digital Content Services with permission from TechCircle.