Speaking during a session on education at the India Economic Summit in New Delhi, Kotak said there are a large number of "schooled" people in the country, but not "educated".
"I am ashamed to say that both my children studied under-graduation courses overseas, because we felt it was better for them," said Kotak, who is Executive Chairman and Managing Director of Kotak Mahindra Bank.
Going by estimates, billions of dollars are spend every year to send Indian students overseas.
Noting that educational reforms should begin at the roots of civil society, Kotak said teaching profession has lost some of its respect.
"Education (system) has to be transformed... The future is bright," he said.
The summit is organised by the World Economic Forum (WEF) in partnership with industry body CII.
At the same session, HRD Minister Smriti Irani said there is a need to rejuvenate the teaching profession and bring back the respect that this vocation once enjoyed.
She further said Prime Minister Narendra Modi's initiative to reach out to students on Teacher's Day was a step in that direction and this initiative should help encourage more young people to turn to teaching as a career.
Kotak also highlighted the need to bring back the respect and dignity to the teaching profession in India.
He observed that previously, education policies focused on the creation of education hardware (school buildings etc).
He was of the view that there needs to be an equal emphasis on the creation of education software such as teachers, teaching tools and teaching methods.
Gary Coleman, Managing Director, Global Industries, Delloitte, USA said that India has a large workforce of 500 million and over 10 million people are being added to that workforce every year.
However, businesses were finding it very difficult to find adequately skilled manpower for their needs. This issue needs to be addressed urgently, he added.