While HDFC Bank holds the No. 1 spot in the Indian banking sector, the battle for the No. 2 spot has become even more exciting, as the race between ICICI Bank and Kotak Mahindra Bank is no longer limited to balance sheet size. The competition now hinges on the powerful triangle of digital agility, diversification of fee income, and asset quality, where both banks are competing fiercely.
A Vast Ecosystem
Through its “iMobile Pay” strategy, ICICI Bank has created a vast digital ecosystem that is no longer limited to its own customers, as its platform also connects millions of external users whose primary account is with another bank.
The bank is focused on an “open architecture,” maintaining its leadership in supply chain financing and AI-based risk management, while Kotak Mahindra Bank, under its new leadership, is positioning itself as a pure-play tech company.
Kotak’s “811” platform is considered one of India’s most successful digital initiatives, and the bank’s significant investments in scaling its digital infrastructure are evident in its smart customer acquisition and low operating costs.
Fee Income and Profitability
In terms of revenue sources, ICICI Bank’s true strength lies in its vast network of corporate banking, credit cards, and insurance distribution, which has helped the bank achieve over 12 percent annual fee income growth. The bank’s net interest margin (NIM) remains at a healthy 4.30 percent, making it an attractive option for investors.
In contrast, Kotak Mahindra Bank distinguishes itself through wealth management and investment banking. Kotak’s NIM is among the best in the banking industry at around 4.54 percent, and its strong CASA ratio gives it a leg up on profitability by providing low-cost funds.
Asset Quality
On the asset quality front, both banks represent the best in the private sector, with Kotak Mahindra Bank historically known for its extremely strict credit policies. Kotak’s net NPA is just 0.31 percent, demonstrating its loan recovery efficiency. However, ICICI Bank’s remarkable asset quality improvement over the past few years is also commendable.
ICICI has now completely shifted from risky corporate loans to safe retail loans, resulting in its net NPA now within the safe range of 0.37 percent, making the bank’s balance sheet extremely strong and reliable.