Kotak Mahindra Bank’s Response


Kotak Mahindra Bank (KMB) sent the following response to this analyst’s article, “KMB Talks of “Highest Standards of Corporate Governance”, But Avoids Telling Shareholders about Adverse SEBI Orders against Executive Director”  (dated August 3, 2022; it was later released to the general public as well, on grounds of public interest, on August 10, 2022).

This refers to your article received today [August 10, 2022]. Kindly note that we have already made our point of view clear to you in our earlier communication which you have reproduced in your article.

We refer to the following lines from your said article:

Although Shah has cited personal commitments, a Securities and Exchange Board of India (SEBI) order dated June 30, 2022, which penalised him Rs. 2 mn for his role in KMAMC, may have contributed to his decision to disassociate himself from KMB’s board beyond October 31, 2022.”

Whilst denying all insinuations and allegations against the Bank, we wish to point out to you that you have chosen to ignore the vital fact, which was in public domain since May 4, 2022, that Mr. Gaurang Shah’s decision was communicated to the Board nearly two months before the SEBI order of June 30, 2022.  You have tried to mis-lead all the stakeholders of the Bank by stating that the SEBI Order could be the reason for Mr. Gaurang Shah choosing to not continue on the Board, as a Whole-time Director.

You are well aware that on May 4, 2022, the Board of the Bank had noted Mr. Gaurang Shah’s request to not continue as a Whole-time Director after the expiry of his current term on October 31, 2022. This was informed to the Stock Exchanges on May 4, 2022.  You may refer to the said disclosure at the following links:



Under the circumstances, we call upon you to desist from making such baseless allegations which damage the reputation of the Bank. We reserve all our rights.”

This analyst has replaced the statement highlighted above by Kotak Mahindra Bank (KMB) with the following:

“Although Shah has cited personal commitments, a Securities and Exchange Board of India (SEBI) order dated August 27, 2021, which highlighted the role of Kotak Mahindra Asset Management Company’s (KMAMC) 3-member Investment Committee, of which Gaurang Shah was a member, may have contributed to his decision to disassociate himself from KMB’s board beyond October 31, 2022.”

It is on account of SEBI’s August 27, 2021 order that the public became aware that the Investment Committee (IC) had approved investments in the Zee founder companies without even bothering “to know the name of the issuers of the debt securities…” (p. 34 para 40). A basic norm in investing is to know the identity of the investee company. That the IC ignored such a fundamental practice indicates the competence of the IC. The order cited allegations in the SEBI charge sheet,

“that the Noticees [KMAMC] has not exercised basic minimum due diligence [bold mine] and has not taken proper care of its investors’ money before taking an investment decision in the ZNCDs [Zero Coupon Non-Convertible Debentures] of the issuer.” (p. 8 para 9.3).

The order found KMAMC to be in violation of provisions in the SEBI Act, 1992, Mutual Funds Regulations, 1996 and various other circulars of SEBI, and penalised the company Rs 5 mn. KMAMC was ordered to refund part of the management fees collected from the investors of the six Fixed Maturity Plans which had invested in the Zee founder companies. The fact that Gaurang Shah was a member of the IC which approved these investments, and was an executive director of KMB when SEBI’s August 27, 2021 order was issued, should have raised concerns regarding his ‘fit and proper’  status as a bank director. KMAMC appealed to the Securities Appellate Tribunal (SAT), and on October 21, 2021 got a stay on the refund of the management fees.

SEBI issued 2 show cause notices to senior officials of KMAMC, including Gaurang Shah, dated May 31, 2019 and October 12, 2020. These officials were granted a personal hearing on April 25, 2022, where they were represented by their authorised representatives. The last hearing took place on June 7, 2022.  In between these hearings, i.e. on May 4, 2022, the board of directors of KMB accepted Mr. Gaurang Shah’s request to not continue as a director when his term ends on October 31, 2022.  On June 30, 2022, SEBI’s order penalised Gaurang Shah Rs 2 mn undermining his ‘fit and proper’ status as a bank director.


I, Hemindra Hazari, am a Securities and Exchange Board of India (SEBI) registered independent research analyst (Regd. No. INH000000594). I own equity shares in KMB. Views expressed in this Insight accurately reflect my personal opinion about the referenced securities and issuers and/or other subject matter as appropriate. This Insight does not contain and is not based on any non-public, material information. To the best of my knowledge, the views expressed in this Insight comply with Indian law as well as applicable law in the country from which it is posted. I have not been commissioned to write this Insight or hold any specific opinion on the securities referenced therein. This Insight is for informational purposes only and is not intended to provide financial, investment or other professional advice. It should not be construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any security.