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Shares of Kotak Mahindra Bank (KMBL) are under scrutiny following the Reserve Bank of India’s (RBI) decision to impose certain business restrictions on the private lender. This article explores the details of the RBI’s action and Kotak Mahindra Bank’s response.

RBI’s Restrictions on Kotak Mahindra Bank

On April 24, 2024, the RBI directed Kotak Mahindra Bank to cease onboarding new customers through its online and mobile banking channels. The central bank also prohibited the issuance of new credit cards by the lender. This action stems from the RBI’s concerns regarding Kotak Mahindra Bank’s information technology (IT) infrastructure, following an examination conducted in FY22/FY23. The frequent tech outages experienced by the bank, including one on April 15, 2024, further prompted the RBI’s intervention.

Impact on Kotak Mahindra Bank

The RBI’s restrictions are a significant blow to Kotak Mahindra Bank, considering its heavy reliance on digital channels for customer acquisition. Reports suggest that nearly 95% of the bank’s new personal loans, 99% of new credit cards, and a substantial portion of new business loans and investment accounts were acquired digitally. This disruption is likely to impact the bank’s growth prospects in the near term.

Kotak Mahindra Bank’s Response

Kotak Mahindra Bank has acknowledged the RBI’s directive and assured that they are taking steps to address the concerns. The bank has initiated measures to strengthen its IT systems through the adoption of new technologies. They have also expressed their commitment to working collaboratively with the RBI to resolve the identified issues swiftly.

Investor Sentiment and Share Price

The news of the RBI’s restrictions triggered a negative reaction from investors. Kotak Mahindra Bank’s share price witnessed a significant decline, with some reports indicating an all-time low. Analysts have revised their ratings and target prices for the stock, reflecting the uncertainty surrounding the bank’s ability to overcome the regulatory hurdle.

Looking Ahead

The future trajectory of Kotak Mahindra Bank’s share price will depend on how effectively they address the RBI’s concerns and regain the regulator’s confidence. The bank’s ability to improve its IT infrastructure and ensure seamless digital operations will be crucial in this process. Investors are likely to closely monitor developments in this regard before reassessing their investment decisions.