As part of business reorganisation and succession planning, Kotak Mahindra Bank is working on carving out its digital platform and super app Kotak 811 into a wholly-owned subsidiary.

Highly placed sources say Kotak 811 may undergo some modifications to be rehauled into a payment interface and system. The billionaire banker Uday Kotak’s son Jay Kotak, who is currently a Vice-President at the bank and Co-head of Kotak 811, may head the subsidiary.

“The move will put to rest some of the succession related issues across various business units and fortify Kotak Bank’s position in the payments space,” said a highly placed source who didn’t want to be named.

An e-mail sent to the bank regarding the matter remained unanswered.

It is learnt that the once Kotak 811 is made into a subsidiary, it would approach the regulator for payment aggregator/payments gateway (PA/PG) licenses. Also, the digital platform which is already available to non-Kotak Bank customers will aggressively extend financial services in the payments space to the public at large.

“Work in this regard commenced some time last year and the bank may reach out to the regulator in a few months with the proposal,” said another person aware of the matter. Kotak 811 is presently a business unit of the bank’s retail arm.

If spun off into a subsidiary, the digital platform can have its own funding sources and business plans, independent of the bank. Also, Kotak Mahindra Bank may be the first to structure its super app a subsidiary.

Talks with RBI

Sources say that the bank has had talks with the Reserve Bank of India in this regard. However, since it currently caters predominantly to Kotak Bank customers, there are doubts on how ownership of the customer and the allied transaction or credit risks will be demarcated by the bank and Kotak 811.

“Since this would be the first instance of a bank carving out its digital platform into a wholly owned subsidiary, these are grey areas. Until effectively addressed, the regulator may not be comfortable with such a the proposition,” said another person aware of the matter.

At present, Freecharge which is a subsidiary of Axis Bank is the only comparable example. The bank acquired the payments app in April 2015. There were plans at the State Bank of India to carve out its super app YONO into a separate unit, though the move seems to have been shelved for now.