The RBI’s decision to stop credit card issue and new customer onboarding caused Kotak Mahindra Bank share price to drop 12% to Rs 1,620. Brokerages lowered target prices because of worries about the dependence on online channels and its effects on long-term growth.
In early trade on Thursday, Kotak Mahindra Bank share price fell by 10% following punitive measures taken by the Reserve Bank of India (RBI) against the bank. On the BSE, Kotak Mahindra Bank share price fell as much as 10%, to ₹1,658.75 a share. Kotak Mahindra Bank was instructed by the RBI on Wednesday to stop issuing new credit cards and onboarding new clients via its online and mobile banking platforms.
The private sector lender’s ability to issue new bonds has been restricted by the central bank in 2022 and 2023 because of flaws in the bank’s IT system. According to Kotak Mahindra Bank, these changes won’t have a significant effect on its overall company.
The Bank will keep collaborating with RBI to expeditiously address balance issues as soon as possible. The Bank has taken significant steps to implement new technology to bolster its IT systems. In a stock exchange filing, Kotak Mahindra Bank stated, “The Bank would like to reassure its existing customers of uninterrupted services, including credit card, mobile, and net banking.
The bank stated that its branches will keep accepting new clients and provide them all of its services—with the exception of issuing fresh credit cards. The RBI limits, according to analysts, will hurt Kotak Mahindra Bank’s expansion. They anticipate that after the corrective action plan and external audit are completed to RBI’s satisfaction, which usually takes six to twelve months, the restrictions would be reconsidered.
Regarding Kotak Mahindra Bank Share Price, the RBI said
According to a statement from the central bank, for the years 2022 and 2023, the bank found flaws and violations in a number of areas related to the IT system, including “IT inventory management, patch and change management, user access management, vendor risk management, and data security.
Kotak Mahindra Bank stated that it will keep working with the RBI and that it has taken steps to embrace new technology to strengthen its IT systems. The Reserve Bank of India (RBI) stated that the bank’s Core Banking System (CBS) and its online and digital banking channels have experienced frequent and significant outages in the last two years due to a lack of a strong IT infrastructure and IT Risk Management framework. The most recent disruption occurred on April 15, 2024, which caused significant inconvenience to customers.
What experts have to say about how the RBI’s directive will affect Kotak Mahindra Bank
The bank’s growth, net interest margin (NIM), and fee income could all be negatively impacted by RBI intervention, according to Citi. Targeting ₹2,040 per share, the brokerage issued a “neutral” call on the stock. Emkay Global added, “This will lead to earnings being hit in the medium term,” in reference to how the restrictions would affect the growth of the company. Furthermore, any expectation of a re-rating following the recent management transition would be delayed by the regulatory overhang.”
Jefferies compared Kotak Mahindra Bank to HDFC Bank, noting that the latter was subject to same RBI regulatory action in 2020. The brokerage business stated that Kotak Mahindra Bank’s earnings and expenses may be impacted if the resolution process takes longer than six months.
People Ask For:
Is Kotak Bank a buy or not?
The TTM P/E ratio of Kotak Mahindra Bank share price is 21.73, while the sector P/E is 9.46. Kotak Mahindra Bank has 36 analysts who have started following the company. Ten experts have rated it as a buy, and nine analysts have given it a strong buy. The stock has received a sell rating from three analysts.
What is the target of Kotak Mahindra Bank share price in 2025?
The firm lowered its target price for the stock in March 2025 from ₹1,950 to ₹1,750 per share and altered its recommendation for the stock from ‘add’ to’reduce’. It also stated that the regulatory overhang would postpone any hopes of a re-rating following the recent management change.
Why is Kotak Mahindra Bank share price down?
Following the Reserve Bank of India’s (RBI) decision to prohibit the bank from issuing new credit cards and onboarding new customers online, Kotak Mahindra Bank share price stock experienced a decline of over 11%. Kotak Mahindra Bank was prohibited from participating in these activities by the central bank due to serious issues with its IT system, the statement stated.
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