Kotak Mahindra Bank shares crash after RBI action : Shares of Kotak Mahindra Bank have suffered a major blow due to the action of the Reserve Bank of India (RBI). Shares of the bank fell to their 52-week low on Thursday after the RBI issued an order on Wednesday barring Kotak Mahindra Bank from adding new customers and issuing new credit cards through online and mobile banking channels. The lowest level was seen. During the day’s trading, the bank’s shares fell by 12% to Rs 1,620. Even at around 1 pm, the bank’s shares were trading at Rs 1,642.80 on NSE, down by about Rs 200 or 11 per cent.
Fear of impact on business expansion
It is generally believed that due to RBI’s action, Kotak Mahindra Bank’s ability to add new customers will be affected, which may impact the bank’s business expansion as well as its potential growth. Due to these concerns, there was heavy selling pressure in the shares of Kotak Mahindra Bank on Thursday and many brokerages also cut their target prices.
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RBI’s action spoiled the sentiment
Due to RBI restrictions, not only the market sentiment about the bank has deteriorated in the short and medium term, but it can also have a negative impact on the potential growth of the bank’s business, Net Interest Margin (NIM) and fee income. . This is the reason why many brokerages have started cutting their target prices on this stock. Analysts also believe that the bank’s dependence on online channels to add new customers has been very high, hence RBI’s action will have an impact on its business expansion.
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Many brokerages reduced target prices
Global brokerage Jefferies has given ‘Hold’ rating on Kotak after RBI action. However, he has reduced the target price of the bank from Rs 2,050 to Rs 1,970. Macquarie has also admitted that the Reserve Bank’s action is a big blow to the bank. But at present he has not made any change in his target. At the same time, Emkay Global Financial has also reduced the target price from Rs 1,950 to Rs 1,750, advising investors to reduce their holdings in the bank.
CLSA analysts believe that if the RBI restrictions do not last for a long time, then its impact on the bank’s performance will be ‘moderate’ only. The brokerage says that even though credit cards are a fast-growing segment of the bank’s business, its contribution to the bank’s total loan book is only 4 percent.
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Reserve Bank issued order on Wednesday
In the statement issued by the Reserve Bank on Wednesday while taking action against Kotak Mahindra Bank, it is said, “Using its powers under Section 35A of the Banking Regulation Act 1949, the Reserve Bank of India Kotak Mahindra Bank Limited It is ordered to stop (i) adding new customers through online and mobile banking channels and (ii) issuing new credit cards with immediate effect. “However, the bank will continue to provide its services to its existing customers, including credit card customers.” Earlier, in October 2023, RBI (Reserve Bank of India) had also imposed a fine of Rs 3.95 crore on Kotak Mahindra Bank due to several issues related to non-compliance.
Action was also taken against HDFC Bank 4 years ago
The Reserve Bank had also taken similar action against HDFC Bank in December 2020, under which the country’s largest private bank was stopped from issuing new credit cards and introducing new digital products. This action was taken against HDFC Bank after continuous flaws came to light in its activities related to digital banking, cards and payments.
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