A two-day Opposition inquiry into the banking system began on Wednesday at Parliament.
KiwiBank was the first to make a submission. The inquiry is being held without the Australian-owned banks.
KiwiBank chief executive Sam Knowles was asked by Labour MPs if he thought these banks are "ripping off" customers by not passsing on cuts in the Official Cash Rate in full.
Mr Knowles said KiwiBank has been able to offer what he thought were more competitive interest rates to attract customers and build market share.
He said this differs from the established banks whose strategy he says has been to maximise profits from existing customers.
KiwiBank has also benefited from being able to raise more of its funds from cheaper local deposits.
But Mr Knowles said the state-owned bank will find it harder to offer competitive mortgage rates in the future as banks compete more for local deposits.
The inquiry will also hear from the financial services union, Finsec and Federated Farmers on Wednesday.
It is being conducted by Labour, the Green and the Progressive parties. Parliament's Finance and Expenditure Committee earlier decided an inquiry was unnecessary.
The committee expects to report by mid to late October. Its findings will be presented to the Treasury, the Reserve Bank and the Finance Minister.
