Kotak Mahindra Bank expanding infra-financing play, says Honcho Paritosh Kashyap

Infrastructure financing is and remains a critical focus area for Kotak Bank. Our infrastructure exposure has nearly doubled in the last 18 months. While our focus is on completed projects, we also look at under-construction projects backed by marquee sponsors. We aim to cover the entire ecosystem of infrastructure financing, including transaction banking, escrow accounts, and full underwriting and syndication of project loans.

Kotak has historically focused more on sectors such as renewables, roads, and telecom within the infrastructure space. Incrementally, we are now also focusing on the logistics and warehousing space.

Kotak’s infrastructure book is around 10% of its wholesale bank’s advances book.

Kotak aims to be a provider of a full gamut of banking solutions in the infrastructure space, including the underwriting and distribution of larger project loans and transaction banking solutions such as cash management and escrow solutions.

Infrastructure is a key focus area, and its financing is seeing participation from not just the government but the private sector as well, including banks. It is estimated that ₹143-lakh crore will be invested in the infra space in the country from here on till FY2030. Roads is an important sector in this space and is expected to witness investments of over ₹37 lakh crore during this period. 85 per cent of this is likely to be government-funded, with the private sector funding the remaining 15 per cent, which translates to around ₹5.6-lakh crore. Large part of these projects will be funded by a 70:30 debt:equity mix which translates to a debt requirement of Rs 3.92 lakh crore. Banks will be a major contributor to this debt. And this is for roads alone. Funding opportunities are huge in the entire infra space.

Kotak’s primary focus areas in 2024 include transaction banking, where the emphasis will be on using technology and data to enhance customer service. We will focus on creating an ecosystem for corporate clients and making banking more convenient for them.

We aspire to be relevant to our customers, not just in size but also in our offerings. We aim to be a full-service player, providing tailored solutions that address needs of a customer, from lending on our balance sheet to the distribution of assets, managing the customers’ collection, payments, and cash management requirements, managing their trade, forex, and remittance flows, and becoming their preferred transaction banker.

Kotak’s focus on transaction banking involves providing corporate customers with end-to-end solutions. This includes facilitating payments, collections, opening Letters of Credit (LCs), foreign remittances, and more to create a comprehensive ecosystem for corporate clients.

We understand that the methods of transaction banking are rapidly evolving. Digitalization and global acceptance of the need for technology and its swiftness are disrupting trade and conventional business methods. Kotak’s digital journey is agile, evolving, and flexible to adapt to changes. We are striving to lead the change by investing in and adopting new technologies that are revolutionising transaction banking. Kotak fyn (For Your Needs) is one of the examples that takes the leap in providing DIY solutions to clients. 

It’s a one-stop-shop solution for corporates where they can initiate collection and payments and explore other trade solutions digitally. Kotak fyn also serves the purpose of being a faster, more compliant, and more transparent solution for corporates.

As of now, banks are investing heavily in technology to service customers, and at the current pace of technology investments, we will not be surprised if we morph into tech companies providing banking services. The use of technology on the wholesale banking side has traditionally lagged. But having experienced improved experiences on the retail side, most corporates are now demanding similar improvements on the corporate side as well. Banks are now investing to offer more convenience, better products, and improved customer experiences through technology to corporate customers.

The credit environment is exceptionally positive, with all-time low default rates across banks and high provision coverage ratios for non-performing assets (NPAs). Additionally, banks have raised significant capital. The business landscape is also thriving, especially with the recovery from the impact of Covid-19.