Kotak Bank deposit growth may be hit, shares fall 11%

“The will impact the bank’s ability to acquire new until the ban is lifted because a significant number of new customer acquisition was done through its digital banking platform- Kotak811,” a banking analyst said.

For instance, 72% of the new savings accounts in FY23 — the latest available data — were acquired through Kotak-811. As many as 17.5 million savings account customers were onboarded through the Kotak-811 platform, as of March 2023.

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“Secondly, new affluent walk-in customers will want a credit card as part of their onboarding kit, but since the bank is restricted from issuing them until the ban is lifted, it could be a deterrent,” added the analyst.

The stock, which lost nearly 11% Thursday, saw active cash trades of about 11,000 crore. , which was the next most traded on the Nifty, didn’t generate half the volumes that Kotak Mahindra did.

The ban comes at a time when mobilising deposits, particularly low-cost deposits, has emerged as one of the biggest challenges for most banks.

Since the bank’s focus has been onboarding customers through online channels, it has slowed the pace of adding branches. According to a Macquarie report, it has added just 350 branches in four years. , on the other hand, added 900 branches in just one year.

In a letter to employees to address their concerns, the newly appointed MD & CEO Ashok Vaswani reassured that the bank is diligently working toward resolving the issues raised by the regulator. “The exponential growth in business through our digital channels has necessitated a completely different level of technology infrastructure, which we have been steadfastly building,” he stressed in the letter.

In a separate FAQ (frequently asked question), KVS Manian, joint managing director of Kotak Mahindra Bank, said services to existing Kotak811 customers will not be impacted.

Kotak Mahindra Bank's current and savings account deposits fell to 47.7% in the third quarter ending December 2023 from 53.3% a year ago. A report by Emkay said they are likely to be at 478% for the fourth quarter ending March 2024 and fall further to 47.2% in FY25. The bank is scheduled to announce its fourth-quarter results on May 4. Similarly, the net interest margin stood at 5.22% on December 31, 2023, but it may fall below 5% in FY25, Emkay said.