Kotak Mahindra Bank to redeploy resources to minimize the business impact of RBI's action

Kotak Mahindra Bank to redeploy resources to minimize the business impact of RBI’s action

In response to recent regulatory actions by the Reserve Bank of India (RBI), Kotak Mahindra Bank, on May 4, announced its proactive measures aimed at mitigating potential business impacts. The bank conveyed its intention to strategically redeploy resources to counteract the ramifications of the central bank’s directives.

“The bank is looking to redeploy resources to minimize the business impact and believes that these directions will not materially impact its overall business,” the bank said in the investor presentation.

Acknowledging the regulatory restrictions imposed by the RBI, Kotak Mahindra Bank conducted a thorough assessment of their potential repercussions. The bank highlighted the anticipated impact on various aspects, notably franchise and customer-related activities. Specifically, the bank identified potential challenges affecting new credit card issuance and customer acquisition through its 811 platform.

“Impact would be on franchise and customers, directly impacted businesses, primarily new credit cards and customer acquisition through 811, potential financial impact,” the bank said.

The RBI whip

On April 24, the RBI barred the bank from onboarding new customers through its online as well as mobile banking channels. The central bank also restricted the bank from issuing fresh credit cards.

The RBI, in its examination of the bank’s IT systems over the last two years, said that the bank continuously failed to address concerns raised by the regulator.

“These actions are necessitated based on the significant concerns arising out of the Reserve Bank’s IT examination of the bank for 2022 and 2023 and the continued failure on the part of the bank to address these concerns in a comprehensive and timely manner,” the RBI said.

According to the central bank, serious deficiencies and non-compliance were observed in the areas of IT inventory, patch and change, user access and vendor risk management. There were also gaps in data security and data leak prevention strategy, business continuity and disaster recovery rigour and drill.

Q4 results

The bank on May 4 reported a net profit of Rs 4133 crore for the January-March quarter of the financial year 2023-24, up by 18 percent from Rs 3496 crore reported in the corresponding quarter of last year.

The lender’s net interest income came at Rs 6,909 crore, up by 13 percent YoY from Rs 6,103 crore last year. The net interest margin (NIM) of the lender was at 5.28 percent for Q4FY24.

The GNPA of the lender stood at 1.39 percent versus 1.78 percent last year and NNPA was at 0.34 percent compared to 0.37 percent last year.

The advances of the bank increased 20 percent YoY to Rs 3.91 lakh crore as versus Rs 3.25 lakh crore last year. Average current deposits grew to Rs 60,160 crore for Q4FY24 compared to Rs 58,415 crore for Q4FY23 and average savings deposits grew to Rs 1.23 lakh crore compared to Rs 1.17 lakh crore. The lender’s term deposit grew to Rs 2.24 lakh crore for Q4FY24 compared to Rs 1.66 lakh crore.