May see normalisation in microfinance book by Apr-Jun, says Kotak Bank MD
This story was originally published at 19:46 IST on 18 January 2025
Register to read our real-time news.Informist, Saturday, Jan. 18, 2025
Please click here to read all liners published on this story
--Kotak Bank: Continue to spend 10-12% of total expenditure on tech infra
--Kotak Bank: Will focus on credit card business once out of RBI embargo
--Kotak Bank MD:Working with RBI to exit embargo on new customer on-barding
--Kotak Bank: Microfinance loans still major portion of slippages
--Kotak Bank MD:Credit card, personal loan, microfin ops growth slowing down
--Kotak Bank MD: Credit costs showing signs of plateauing
MUMBAI – Kotak Mahindra Bank expects to see normalisation in the microfinance book by 2025-26 (Apr-Jun), said Ashok Vaswani, the managing director and chief executive of the bank, in a post-earnings conference call on Saturday. He said the bank has already seen a slowdown in growth in the unsecured segments--personal loans, credit cards and microfinance.
"In personal loans we're already seeing improvement (in delinquencies), credit cards, it has kind of plateaued. So, hopefully in the next quarter and two quarters, we can actually see an improvement in credit cards. As far as microfinance loans are concerned, we're continuing to see a rise in delinquencies. But there is a deceleration of the growth of delinquencies. So what we suspect is that microfinance should plateau, if not in this current quarter, potentially the next quarter. On an overall basis, I think you will see a pattern and a downward trend starting Q1 (Apr-Jun) of the next fiscal year," Vaswani said.
As of Dec. 31, the credit card business has grown 2% on year to INR 141.17 billion. Sequentially, the book fell by 2%. Retail microcredit has de-grown 16% on quarter and 3% on year to INR 82.25 billion.
The fresh slippages in the reporting quarter stood at INR 16.57 billion, which is lower than INR 18.75 billion seen a quarter ago. The fall in slippages is attributed to tractor finance business and the personal loan businesses, where the bank is seeing an improvement in credit quality, the management said. Microfinance formed the higher share in slippages in Oct-Dec.
He also said that credit costs are beginning to show signs of plateauing, which is a positive indicator for the bank, the management said. On an annualised basis, the credit cost for the bank in the reporting quarter was seen at 0.68%, 0.65% in the previous quarter, and 0.55% in Apr-Jun.
Kotak Mahindra Bank Saturday in an exchange filing said that they have approved a proposal to raise funds by way of issuance of non-convertible debentures, for an amount up to INR 100 billion, in one or more tranches or series, during 2025-26 (Apr-Mar), subject to regulatory approvals. As of Dec. 31, the Basel-III capital adequacy ratio of the bank stood at 22.79%.
RBI ACTION ON BANK
The bank said that they were closely working with the Reserve Bank of India to lift the restrictions imposed on the bank in April last year. The central bank had asked the bank to cease and desist from on-boarding new customers on their online and mobile banking channels and stop issuing fresh credit cards.
The RBI had said it noted serious deficiencies and non-compliances by the private sector bank in information technology inventory management, patch and change management, user access management, vendor risk management, data security and data leak prevention strategy, business continuity and disaster recovery rigour and drill.
When asked if the bank saw the restrictions lasting beyond nine months, Vaswani said that the management made many assumptions on how the portfolios will behave. "We made assumptions on how much we would have to spend. We made assumptions on acquisition costs. We made assumptions on marketing costs. So it was a pretty complex set of variables that we were trying to manage," he said. "At that time, (Chief Financial Officer) Devang Gheewalla and I both felt that it was important to give assurance to the market that kind of number in and around which we think there will be the impact of the embargo. That's why we came up with that number of 450 crores (INR 4.5 billion). The good news is the total impact of the embargo is still in line with what we had initially estimated at about 450 crores (INR 4.5 billion)," he added.
They said that once the restrictions on credit card was lifted, they will focus on growing that book. On increasing spending on the bank's technological infrastructure, the bank's management said that on an average, they will continue to spend 10-12% of their total expenditure on technology.
On Friday, the shares of the bank closed 2.6% lower at INR 1,758.60 on the National Stock Exchange. End
Reported by Kshipra Petkar
Edited by Akul Nishant Akhoury
For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.
Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.
Informist Media Tel +91 (22) 6985-4000
Send comments to feedback@informistmedia.com
© Informist Media Pvt. Ltd. 2025. All rights reserved.
To read more please subscribe
Share this Story:
