''Rather than positioning ourselves as a new bank, we consider ourselves to be a 20-year-old financial services brand with a new look'' Uday Kotak, Vice Chairman, Kotak Mahindra Bank

Senior managers huddling over aggressive deposit mobilisation targets, red-eyed managers living out of their suitcases as they embark on yet another whistle-stop branch expansion tour, vice-presidents dashing from one brainstorming session to another, marketing honchos burning the midnight oil as they fine-tune a publicity blitzkrieg... those are some of the vignettes that would be playing in your mind on your way to the headquarters of a six-month-old fledgling bank. You'd expect such a flurry of activity from Kotak Mahindra Bank as it plays catch-up against rivals who are streets ahead on every parameter, be it pedigree, asset base, branch network, or brand equity. You'd also expect to meet a slightly frayed CEO deluged with powerpoint presentations and drained out by a string of countless meetings that go on way beyond dusk. Instead what this writer encounters is a beaming, relaxed Uday Kotak, basking in the November sun streaming through the second-floor bay windows of Bakhtawar building in Nariman Point, Mumbai's commercial district. Sure there are targets to be met, new branches to be opened, but the 44-year-old Vice Chairman is definitely not losing any sleep over them. That's because by getting a banking licence earlier this year from the Reserve Bank, Kotak's got what he's been yearning for most all these years: Respect.

"A bank spells respectability and credibility in capitals," avers Executive Director Dipak Gupta, who's played a vital role in executing the bank blueprint. What Gupta doesn't spell out but alludes to is that Kotak Mahindra Finance Ltd. (KMFL) was finding the taboo tag of "NBFC" (non-banking finance company) a millstone around its neck. Whilst KMFL might have had an unblemished record, it couldn't avoid being tarnished with the same NBFC brush, as a result of which not just investors but a large portion of the financial community preferred to give Kotak's non-banking conglomerate the go-by.

Integrated Gameplan

The first nbfc to be granted a banking licence, Kotak Bank has structured an innovative and non-traditional business model. "Don't forget that rather than positioning ourselves as a new bank, we consider ourselves to be a 20-year-old financial services brand with a new look," elucidates Kotak, attired in regulation-banker grey slacks and a white shirt with a paisley tie. At the heart of Kotak's model is the way the new-kid-on-the-block perceives today's customer. With interest rates on a downward spiral, investors are no longer keen to squirrel away their savings in a dowdy savings account and hope there will be enough to tide them over rainy days. "From being a nation of passive savers we need to become interactive investors," is what Kotak prescribes. His bank's integrated gameplan-akin to and inspired by European banks-thus unsurprisingly aims to meet every investment need of a consumer, straddling the entire gamut from plain vanilla bank accounts to personal loans to mutual funds to insurance to securities trading.

"What's great about that?" you'd probably ask. After all, every bank worth its stripes-be it a private sector player like HDFC Bank or ICICI Bank, or public sector giant SBI-has rolled out an umbrella of products and services to meet every conceivable need of today's retail investor. The crucial difference, explains banking and financial services analyst at Mumbai-based Enam Securities, Punit Srivastava, is that whilst the others have originally been banks that went ahead and acquired a basket of retail assets, KMFL has been in the retail finance business for close to 20 years and today flaunts an enviable portfolio.

What's more, Kotak has the advantage of starting out with a veritable clean slate-those cumbersome irritants called NPAs (non-performing assets), a drag on the balance sheets of most Indian banks are complete strangers to Kotak. And don't forget the benefit of having a compact, nimble and young workforce, something most public sector bankers would trade in their favourite suits for.

''Our appetite for liabilities will be determined by our appetite for assets'' Dipak Gupta, Executive Director, Kotak Mahindra Bank

Borrowing Cheap

Indeed, Kotak might have spent a couple of anxious years waiting for his licence to come in, but the timing couldn't have been better, when interest rates are falling and borrowing was never so cheap.

As any banker will tell you, borrowing cheap is one key to a bank's profitability (the other is the ability to lend at attractive rates). Traditionally, banks have gone the whole hog garnering deposits as that significantly lowers the cost of funds (it could be nil for a current account to a low 4 per cent for a savings account). This money is then deployed in higher-earning retail assets. But in Kotak's "inverted" model or "shirshasan" (inverted yogic pose), as it's referred to internally, it's the other way around. "Our appetite for liabilities will be determined by our appetite for assets," says Gupta, an 11-year-old KMFL veteran, in characteristic banker-speak.

What Gupta means-and that's probably why Kotak Mahindra Bank's top managers are not losing sleep-is that its deposit mobilisation strategy pivots around converting existing customers, at least initially.

It's already found success with its high net worth individual clients, more than half of whom have already opened banking accounts with Kotak. But in order to expand its deposit base to Rs 500 crore-the three-year target-it has to attract new customers. In line with recommendations of consultants McKinsey & Co, only households with annual incomes of over Rs 4,50,000 predominantly in six large cities will be targeted. Delivery channels, presumably to effectively service and retain customers, are being fine-tuned. Says a confident Kotak: "My model for home banking is inspired by nothing less than Domino's Pizza, so we're talking real timely and efficient service here." And service, more than traditional differentiators like safety and geographical location, will play an increasingly important role, feel banking analysts as the entire industry gets commoditised.

That is not to say corporates will be ignored. Old Kotak Mahindra hand Shanti Ekambaram, after eight years in investment banking, is now working overtime integrating with corporate banking. "We want to leverage our existing investment banking relationships, expand our small and medium enterprises business and basically increase our mindshare and wallet share through providing a range of value-added services," says Ekambaram, Group Head (Corporate & Institutional Banking).

In fact, non-fee based or advisory services are expected to contribute an additional 10 per cent to the consolidated group turnover, from 30 per cent currently. And it's not just advice on financial products that Kotak Mahindra Bank is contemplating; clients will be helped out with their entire investible surplus-gold, real estate and even contemporary art. Clearly, Kotak's banking licence includes for good measure an artistic one too.