India regulator lifts curbs on billionaire-backed Kotak Bank
RBI said it was satisfied with bank’s submissions and remedial measures
India’s banking regulator has lifted restrictions on Kotak Mahindra Bank Ltd. after nearly 10 months, which saw the lender’s margins shrinking during the period.
“The bank initiated remedial measures to address the supervisory concerns and submitted compliances to the Reserve Bank,” the central bank said in a statement Wednesday.
Remedial measures
The Reserve Bank of India said it was satisfied with Kotak Bank’s submissions and the remedial measures and so has decided to lift the restrictions.
Kotak Bank, founded by Asia’s richest financier Uday Kotak, was banned from adding customers through its digital platforms and from issuing new credit cards last April, after the regulator found lapses and non-compliance in various processes.
The ban was a setback for the lender, which hoped to leverage technology to capture a larger share of the customer’s wallet in a rapidly digitising India.
The bank’s shares rose as much as 2.5% on Thursday, the most since Feb. 4. Citi Analyst Kunal Shah expects Kotak Bank to roll out credit cards with an aggressive marketing campaign and drive deposit mobilization through its 811 app.
“This development increases visibility towards targeted share of unsecured loans to mid-teens which dropped to 10.5% in 3Q,” Shah said in a note.
The bank said in a statement that it “will continue to work closely with the RBI to shortly resume digital onboarding of new customers and issuing fresh credit cards.”
Financial inclusion
The world’s most populous country has invested in a vast ecosystem of technologies to increase financial inclusion in recent years. Still, many lenders are grappling with legacy systems and attempting to overhaul those.
The curbs on Kotak followed glitches that disrupted cash withdrawals and digital transactions of its customers.
Reprieve
The removal of restrictions will offer a reprieve to the bank whose net interest margin declined to 4.93% in the quarter ended Dec. 30, from 5.22% a year ago.
The bank is looking to cross-sell more products to its existing customer base. It also acquired Standard Chartered Bank’s personal loan portfolio, which gave access to new affluent customers amid the RBI curbs.
