The business restrictions imposed by the Reserve Bank of India (RBI) will have a “relatively small” financial impact but the reputational damage it can cause is of more concern, a top official said on Saturday.

Ashok Vaswani, who took charge as managing director and CEO of Kotak Mahindra Bank only in January this year, said the lender’s focus would be on upgrading technology and upping investments as it makes regaining trust of customers and regulators its top priority.

Addressing his first press conference after taking charge, Vaswani admitted that the RBI directive will have an impact on the credit card business and its digital banking-focused 811 activities.

“I am more worried about the reputational impact than the financial impact. The financial impact will be relatively small,” Vaswani told reporters.

Expecting the restrictions to last for a “couple of months”, Vaswani said that it will have a limited impact on liability growth.

On 24 April, the RBI barred Kotak Mahindra Bank from onboarding new customers through its online and mobile banking channels and issuing fresh credit cards with immediate effect due to “serious deficiencies” in the lender’s IT system. 

Barely a week later, KVS Manian, the bank’s joint managing director, resigned to pursue opportunities elsewhere in the financial sector.

Highlighting the bank's efforts to upgrade its technology systems over the past two years, Vaswani said measures were taken like increasing investment in tech capacity, hiring at the senior level and allocating nearly 10% of operational expenses to IT spending. But these have “clearly fallen short”, he added.

Vaswani said the spending was around Rs 1,700 crore in FY24 versus Rs 1,300 crore in the year-ago period. This will increase at a similar rate, he added.

Kotak Mahindra Bank’s deputy managing director Shanti Ekambaram said the lender will focus on doing more business with its existing customers and deepening relationships through more cross-selling.

The bank’s group chief financial officer Devang Gheewalla said the lender spent 10% of its operating expenses on the tech front in FY24. The order may lead to an acceleration of the spending, he added.

According to Vaswani, the tech aspect will take a lot of time and mindshare of the top management going forward, and the bank wants to come out of the embargo in a “roaring” way.

Jay Kotak, the son of the bank’s promoter and Vaswani’s predecessor Uday Kotak, continues to be the co-head of the 811 offering.