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Informist, Saturday, Jul. 26, 2025

--Kotak Bank: Seeing growth in credit card business post launch of new cards

--CONTEXT: Comments by Kotak Bank management at post-earnings press meet

--Kotak Mahindra Bank: See MFI business picking up in Oct-Mar

--Kotak Bank: Saw stress in commercial vehicle business segment last 2 quarters

By Akash Mandal and Vaishali Tyagi

MUMBAI – Kotak Mahindra Bank Ltd. sees its credit cards business showing robust growth going forward as the bank recovers from the restrictions imposed by the Reserve Bank of India last year, its management said in a press conference post-earnings announcement. Asset quality is also expected to improve, with credit costs seen coming down, it said.

"It takes a bit of time to get the engines kind of going and that is what we have been going through...I feel pretty good about getting back into a good positive trajectory on cards," the management said. The bank said it is seeing growth in its credit card business on the back of new cards launched after the RBI lifted its embargo on the bank's credit card business on Feb. 12.

The bank also expects repositioning of its '811' segment for savings deposits to drive robust growth on the liability book and the overall current-account-savings-account ratio. "...on deposit mobilisation, we have a strong kind of strategy right from top end where our new Solitaire proposition is attracting very healthy deposits. And then, of course, in 811, we get very good granular retail deposits on an annual basis. So we feel very good that as 811 comes back, we will see a growth in deposits there," the management said.

The bank said the rise in provisions in the June quarter was mainly driven by the microfinance and retail lending segments. On the microfinance business, the management said that stress in the segment is likely to have peaked in the current quarter and sees the segment recovering in the second half of 2025-26 (Apr-Mar).

"In Q1, we think credit costs have kind of peaked and we have selectively started going back...currently, the new disbursements we are doing is in about the same level of run-offs so the book will kind of stabilise and start climbing again once disbursements pick up...so that should be more towards the second half of the year," the management said.

The bank said it has cautiously resumed fresh disbursements in the microfinance segment with incremental slippages on the decline. The bank's annualised credit cost rose to 0.93% as of Jun. 30, from 0.64% a quarter ago and 0.55% a year ago.

The higher credit costs this quarter were mainly due to the microfinance and retail commercial vehicles segment. The management attributed the increased stress in commercial vehicles segment to the volatile macroeconomic environment during the quarter. In the June quarter, microfinance segment constituted 30-35% of the bank's incremental slippages. While the bank remains cautious on the segment, the management said it is "a good business for us" due to the higher return on equity.

While the management did not give any guidance for loan growth, it said the bank targets growth at one-and-a-half to two times the nominal GDP growth. India's nominal GDP growth is expected to rise to 10.1% in FY26 from 9.8% in FY25.

Earlier Saturday, India's fourth-largest private sector lender reported a sharp fall of nearly 48% on year in net profit for the June quarter to INR 32.82 billion as provisions almost doubled from the corresponding quarter a year ago and due to sluggish growth in bank's total income.

On Friday, Kotak Mahindra Bank's shares had closed 0.8% lower at INR 2,124.60 on the National Stock Exchange.  End

Edited by Ashish Shirke

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