Kotak Mahindra Bank shares fall by 10% This follows punitive measures imposed by the Reserve Bank of India (RBI), which restricts banks from onboarding new customers online and issuing new credit cards. IT system deficiencies in 2022 and 2023.
RBI restrictions and analyst insights
As analysts have pointed out, the RBI directive is expected to have a negative impact on the bank’s growth and margins. They estimate that the sanctions may be reconsidered following an external audit and corrective action plan, a process expected to last 6-12 months.
Kotak Mahindra Bank’s response
Despite the setback, Kotak Mahindra Bank is confident that the instructions will not have any material impact on its overall operations. The Bank assures uninterrupted services to existing customers while reaffirming its commitment to resolve IT system issues expeditiously.
Impact on development and evaluation
Analysts anticipate a challenging period for Kotak Mahindra Bank, with a potential decline in business growth and valuation premium due to governance concerns. Its operations are expected to be structurally hampered by the inability to cross-sell products, especially credit cards, through online channels.
Analysts’ Recommendations
Analysts advise investors to exercise caution in the short term and advise existing investors to hold positions, with key support levels identified around ₹1,600. If the resolution process continues for more than six months, the bank’s revenues and costs may be further impacted.
market reaction
At 9:20 am, shares of Kotak Mahindra Bank were trading at ₹1,658.75 on BSE, down 10% in early trade.
