How Uday Kotak built India's 3rd-largest bank with just ₹30L
What's the story
Uday Kotak, the founder of Kotak Mahindra Bank, has revealed the story behind his journey of building one of India's leading financial institutions. It all started in 1985 with a modest capital of ₹30 lakh and a vision to address inefficiencies in India's heavily regulated financial system. Back then, banking was largely state-owned and interest rates were fixed, making it difficult for small and medium enterprises (SMEs) to access funds.
Business model
Kotak's 1st business venture: Bill discounting
Kotak's first business was built around bill discounting, where SMEs were financed at 16% and individuals were offered 12% returns to rediscount those bills. This model not only helped small businesses unlock working capital at competitive rates but also gave consumers the benefit of the arbitrage banks enjoyed. "That was the first open game that enabled us to grow in 1985-86," Kotak said.
Strategic alliance
Partnership with Anand Mahindra
During this time, Kotak met Anand Mahindra, who was then working at Mahindra Ugine Steel after returning from Harvard. He pitched a financing scheme to give Mahindra's suppliers immediate liquidity at lower rates. Impressed by the model, Mahindra became the company's first external investor. "In many ways, Anand Mahindra became our first venture capitalist," Kotak said.
Branding approach
Kotak's unique branding strategy
Kotak also had a unique branding strategy for his company. He insisted on carrying both names, Kotak and Mahindra, on the signboard, just like global financial giants such as Goldman Sachs and Morgan Stanley. "Putting our name gave customers confidence. It meant we were putting our reputation on the line," he said. This partnership also shaped the company's enduring identity in the market.
Business philosophy
Philosophy of 'professional entrepreneurship'
Kotak also emphasized on building a culture of "professional entrepreneurship" in his company. He believed that long-term success requires a combination of entrepreneurial risk-taking with process discipline. "Our belief was to blend the two," he said, explaining how this philosophy paved the way for capital markets partnerships with Goldman Sachs, car finance innovations outpacing multinationals, and expansions into mutual funds and insurance sectors.
Market insight
Perspective on India's changing financial landscape
Reflecting on the early years of his journey, Kotak said that the constraints of a tightly controlled financial environment were actually a hidden advantage. "India in 1985 was on the cusp of change. At some level, we were lucky to be at the right place at the right time," he said. Today, Kotak Mahindra Bank is one of India's largest and most trusted financial institutions.