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A central bank order in India affects Kotak Mahindra Bank’s brand and franchise, according to the CEO

The recent regulatory action taken by the Reserve Bank of India (RBI) against Kotak Mahindra Bank has indeed left a dent on its reputation and franchise, although the financial impact is anticipated to be minimal, as stated by the bank’s CEO, Ashok Vaswani. Addressing the media in Mumbai, Vaswani acknowledged the impact on both the bank’s image and reputation, expressing a commitment to bounce back resiliently as their top priority.

In response to the RBI’s directives, Kotak Mahindra Bank is intensifying its efforts, allocating additional resources and funds to rectify the IT-related issues highlighted. Currently, the bank channels 10% of its total expenditure towards IT, and it pledges to double down on this investment to bolster its systems. The bank is also collaborating with the RBI to appoint an external auditor for its IT systems, a process expected to conclude shortly.

Concerns arose among analysts regarding the potential medium-term impact on Kotak’s growth, particularly due to its heavily digital business model. This apprehension, coupled with the recent resignation of joint managing director KVS Manian, led to a 16% decline in the bank’s share price over six trading sessions.

These regulatory actions followed the resignation of Uday Kotak, the bank’s founder and former CEO, last September, citing personal reasons before the completion of his term.

Despite these challenges, Kotak Mahindra Bank reported a robust 26% increase in fourth-quarter net profit, surpassing analysts’ expectations. This growth was fueled by higher core lending income and a healthy expansion in loans. The bank’s net interest income rose by 21% year-on-year to 260 billion rupees, while its net interest margin (NIM) slightly contracted to 5.28% in the fourth quarter.

Moreover, the bank managed to reduce its gross non-performing assets (NPA) ratio to 1.39% by the end of March, compared to 1.73% in the preceding quarter, reflecting a positive trend in asset quality management.

In summary, while facing regulatory challenges and internal restructuring, Kotak Mahindra Bank continues to demonstrate resilience and financial strength, poised to navigate through the present hurdles and emerge stronger in the future.

Sadhna B

Sadhna B

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