If Kotak Mahindra Bank has acquired droves of new savings account holders, it is thanks to some top-class service and 6% interest rate for deposits of over Rs 1 lakh. Not surprisingly, its savings account deposit base has grown at a CAGR of over 40% to Rs 40,000 crore. Virat Diwanji, EVP and head of branch banking, tells Pranay Lakshminarasimhan that the bank will be relying on technology to further expand its customer base. Excerpts:
Is the 6% interest rate a critical factor in the success of your savings account offering?
The 6% rate definitely gives our frontline that extra tool in the armour when we approach the customer. In the metro-urban markets, people like you and me will have at least two bank accounts. The challenge is to convince the customer to have a third bank account. And to that end, the 6% rate gives our sales people the confidence necessary to arouse the customer’s interest. Once the customer gets interested, the features within the product are good enough for him to be convinced.
How long will you be able to continue offering 6% interest rate?
Well, in that regard, the Reserve Bank of India’s (RBI) decision to freeze interest rates for the moment has been a big positive for us. We knew that dropping our interest rate now is not going to hurt us much. We told ourselves that in the end it is a volume versus margin game. If you had asked me this question a couple of months ago, I would have shared your doubts on whether or not the current rate is here to stay. But with the recent change in the RBI’s stance on liquidity from ‘accommodative’ to ‘neutral’, which effectively means rates would not be cut in the foreseeable future, I am certain that we would be able to offer 6% rate for some more time.
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How large is your savings deposit base and how much do you see it growing by?
Our savings account deposits currently are more than R40,000 crore. Ever since we began operations, we have been growing at over 40% CAGR. Before the
ING Vysya merger, we were growing at 42%, and, amazingly, even since then we have grown at over 40%.
Over the last few years, KMB has expanded its branch network. Does that mean you plan to approach customer acquisition differently?
Obviously, yes, with the increasing focus on digital. Concepts such as Aadhaar-based account opening are new and we will have to adapt ourselves to the changing environment. We are definitely geared up to see the challenge through. We will use technology to acquire as many customers as we can. As a bank, we are still as hungry to acquire new customers as we were when we started.
What are the new digital initiatives that you are working on?
I may not be able to share the specifics at this point in time. But I can tell you they are focused on improving our customer experience, regardless of whether one is walking into a branch or banking from home. The biggest challenge we have faced in the past is the need for a wet signature. But now, because of Aadhaar, we find ourselves with a possible solution to that problem. And we will certainly capitalise on that.