Kotak Bank’s recent run-in with RBI restrictions has stirred speculation over its profit prospects, prompting Nomura to offer insights into the bank’s future. The RBI’s move to halt online and mobile banking customer onboarding has raised concerns about Kotak Mahindra Bank Ltd’s reputation, according to Nomura India, which noted the RBI’s stern stance in its press release.
Despite the setback, Nomura predicts only a marginal impact on Kotak’s business and profitability. Attention now turns to the bank’s forthcoming March quarter results announcement on May 4, where management clarity could shed light on the situation.
Nomura draws parallels between RBI’s actions against Kotak Bank and its previous restrictions on HDFC Bank Ltd. The RBI’s gradual lifting of restrictions on HDFC Bank, notably on credit card issuance, serves as a benchmark, although Nomura emphasizes the reputational fallout for Kotak.
Digital Onboarding and Credit Cards
Digital customer acquisition has been a cornerstone of Kotak’s strategy, but Nomura highlights the bank’s acknowledgment of the relatively low value contribution from digital native customers. While the impact on business is expected to be minimal, Nomura anticipates potential upticks in tech spending and scrutiny over branch expansion.
Regarding credit cards, Kotak Mahindra Bank holds 59 lakh outstanding cards, constituting 4% of its overall loans. Despite the restriction on new card issuance, existing customer servicing remains unaffected. However, Nomura warns of potential hurdles in achieving the bank’s medium-term goal of scaling up unsecured retail loans.
Nomura’s Outlook
Nomura maintains a target of Rs 2,040 for Kotak Mahindra Bank, expressing confidence in the bank’s resilience amid regulatory challenges. While the impact on business and profitability is forecasted to be contained, Nomura underscores the significance of resolving the reputational fallout from the RBI’s actions.
As stakeholders await further developments, Kotak Mahindra Bank finds itself at a crossroads, navigating regulatory headwinds while striving to maintain its market standing.
