As part of the business reorganization and succession planning, Kotak Mahindra Bank is working to convert its digital platform and super app Kotak 811 into a wholly owned subsidiary.
High-ranking sources say that Kotak 811 may undergo some modifications to return to being an interface and a payment system. The son of billionaire banker Uday Kotak, Jay Kotak, who is currently the bank’s vice president and co-head of Kotak 811, could head the subsidiary.
“The move will put an end to some of the problems related to the succession in various business units and will strengthen Kotak Bank’s position in the payments space,” said a senior source who did not want to be named.
An email sent to the bank on the matter went unanswered.
It is known that once Kotak 811 becomes a subsidiary, it would approach the regulator for Payment Aggregator/Payment Gateway (PA/PG) licences. In addition, the digital platform that is already available to non-Kotak Bank customers will aggressively extend financial services in the payments space to the general public.
“Work on this began sometime last year and the bank may contact the regulator in a few months with the proposal,” another person familiar with the matter said. Kotak 811 is currently a business unit of the bank’s retail arm.
If it is spun off into a subsidiary, the digital platform may have its own sources of financing and business plans, independent of the bank. Also, Kotak Mahindra Bank may be the first to structure its super app as a subsidiary.
talks with RBI
Sources say that the bank has had discussions with the Reserve Bank of India in this regard. However, as it currently predominantly serves Kotak Bank customers, there are questions about how the bank and Kotak 811 will delineate customer ownership and transaction or credit related risks.
“Since this would be the first instance of a bank turning its digital platform into a wholly owned subsidiary, these are gray areas. Until it is effectively addressed, the regulator may not be comfortable with such a proposal,” another person familiar with the matter said.
Currently, 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 State Bank of India to turn its YONO super app into a separate unit, though the move appears to have been shelved for now.
