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Kotak Mahindra Bank share price falls more than 11% following RBI order
Kotak Mahindra Bank shares closed at ₹1630, a 11.56% decline over the previous close
Shares of Kotak Mahindra Bank fell more than 11% after the Reserve Bank of India (RBI) restricted the bank from issuing new credit cards and onboarding new customers via online channels. The central bank said it barred Kotak Mahindra Bank from these activities owing to significant shortcomings in its IT system.
Kotak Mahindra Bank's shares closed at ₹1630, a 11.56% decline over the previous close. The bench mark S&P BSE Bankex, meanwhile, gained 0.71%.
What RBI said about Kotak Mahindra Bank
The central bank identified deficiencies and non-compliances in several areas of the bank's IT system for the years 2022 and 2023 which included “IT inventory management, patch and change management, user access management, vendor risk management, and data security”, as per its statement.
Read more: Kotak Mahindra Bank cannot add new customers as per RBI order: Is your money in the bank safe?
Kotak Mahindra Bank said that the bank has implemented measures to adopt new technologies to bolster its IT systems and will continue to collaborate with the RBI.
RBI said, “In the absence of a robust IT infrastructure and IT Risk Management framework, the bank’s Core Banking System (CBS) and its online and digital banking channels have suffered frequent and significant outages in the last two years, the recent one being a service disruption on April 15, 2024, resulting in serious customer inconveniences.”
What analysts have said on impact of RBI's order on Kotak Mahindra Bank
Citi said that RBI action could adversely impact the bank’s growth, net interest margin (NIM) as well as fee income. The brokerage put a ‘neutral’ call on the stock with a target price of ₹2,040 per share.
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Emkay Global also said that the restrictions would impact the business growth, adding, “This will lead to earnings being hit in the medium term. Additionally, the regulatory overhang would delay any hope of a re-rating after the recent management change."
Jefferies drew parallels between Kotak Mahindra Bank and HDFC Bank as the latter also faced similar regulatory action from the RBI in 2020. The brokerage firm said that if the resolution process for Kotak Mahindra Bank extends beyond six months, it could impact both revenues and costs for the bank.
