Kotak Mahindra Bank Faces Regulatory Blow, Analysts Downgrade Outlook

Kotak Mahindra Bank witnessed a significant setback as its shares plummeted by 10% following regulatory restrictions imposed by the RBI. The central bank barred the bank from onboarding new customers online and issuing fresh credit cards due to concerns raised during IT examinations for 2022 and 2023. Analysts have responded swiftly, with Emkay Global downgrading the bank’s rating to ‘Reduce’ and lowering the target price to Rs 1,750. YES Securities raised concerns about the impact on the bank’s strategy to increase its share of unsecured retail loans. Motilal Oswal echoed these sentiments, expressing worries about the disruption to retail product growth and its subsequent effects on margins and profitability. The regulatory intervention is primarily attributed to Kotak Mahindra Bank’s heavy reliance on digital channels for new credit card and personal loan issuance, straining its IT systems. Until the bank commissions a comprehensive external audit, approved by the RBI, and addresses the identified deficiencies, the restrictions will remain in force. Investors are advised to reconsider their positions on Kotak Mahindra Bank stock amidst these regulatory challenges, acknowledging the potential implications for the bank’s growth trajectory and financial performance.